Hudson on the Piketty Phenomenon

[don]

Re: Hudson on the Piketty Phenomenon

he’s produced a book without any solution, and the free enterprise boys like that. The 1 percent don’t mind being criticized as long as there’s no solution to their problem.

that’s why the neoliberal’s love Piketty. That’s why Krugman loves Piketty. You can’t implement it.

Hudson

[Thailandnotes]

Re: Hudson on the Piketty Phenomenon

he’s produced a book without any solution, and the free enterprise boys like that. The 1 percent don’t mind being criticized as long as there’s no solution to their problem.

that’s why the neoliberal’s love Piketty. That’s why Krugman loves Piketty. You can’t implement it.

Hudson

Perfect!

[LazyBoy]

Re: Hudson on the Piketty Phenomenon

If by "what needs to be done," you mean "how to fix the broken system," we can discuss what brought us to this pass and what needs to be done 'till doomsday, but with the foxes in full control of the henhouse very few of our brilliant ideas will come to fruition.

If by "what needs to be done," you mean "how to protect ourselves and maybe even prosper in this rigged, dysfunctional system," I believe that is where EJ wants to keep the focus. That means focusing more on things as they are, not how they ought to be.

The idea is to stay solvent during the death throes of the FIRE economy, then be part of the building of the TECI economy.

OK. I must confess to not reading the TECI details.
But I thought TECI was a "should happen" not a "will happen" and so, by the logic above, it should not be a focus.
Does POOM naturally lead to TECI? Does POOM preclude FIRE and other "rigged, dysfunctional systems"?

[gwynedd1]

Re: Depressions and gold

Fixes you could use under a gold standard:

Spend savings previously accumulated.

Why spend when gold is the best asset to own, which it will be in a depression as we have observed several times. Its not speculation.

Borrow against future revenue

Again why? When the money is dead or inflating then one is motivated to deploy it. When its the best investment in town you just hoard it. Its what happened several times. Again, its not speculation.

Debt forgiveness.

It never happens. It will happen even less under a gold standard.

Sell assets.

To the creditors of course who can call it another successful credit squeeze.

Currency depreciation and deficit spending is really just a covert way of doing the first three of these things.

Yes. Thank God for that. Any economic rents that go to finance needs to be utterly destroyed. Any state should sweat profusely in panic the moment that money makes money according to M-M rather than M-C-M.

However once that occurs, and when the credit apparatus of the state falls into their hands, then what was formally a defense has now become a weapon in their hands. It is a mistake to think that an M1 Garand in the hands of a German is a problem with the M1.

Depressions occur because of excess lending. If banks were not allowed to lend amounts greater than deposits, there would be no endogenous financial cycles. Five nobel prize winners, including Akerloff, are backing Kotlikoff's limited purpose banking. Under that system, aggregate lending is less than or equal to aggregate savings.

Agreed. I have been saying so. Gold standard or no gold standard, credit is credit.

[quote]
Another advantage is that savers would have the choice of risk free, non-interest bearing accounts.
[/qote]

Risk free is nothing but a displacement of risk. Like a risk free war , its only because someone else will take the risk. Risk free is a myth. That is why I have no use for Treasury bonds. I consider them inherently evil. Risk free assets should not grow in value.

These would not require any FDIC insurance.

I think the FDIC is anachronistic. We pretend that we don't know our credit accounts are leveraged specie and then we buy insurance for when we stop pretending. Why not just realize that credit is money , or do away with demand deposits? A well run state could just print the money we all thought we had , and then tax it back in when the crisis is over. I fail to understand the need for FDIC with fiat currency.

Considering the interest bearing accounts, the interest getter (investor) would take all the risk, not the bank. No need for FED, since the banks could never fail to return what they owed. Nor would they ever need "over night loans" , bailouts, or what have you. The banks would not be making much money in this system. Boo, hoo !

I think we need to get away from interest bearing everything. I don't draw interest from a plot of land. All things are effectively an equity relationship. An apple in a bad year is worth more than 10 in a good year. Thus an interest rate of 3 apples a year makes no sense in either year.

[santafe2]

Re: real estate tax breaks

If you just buy a house and rent it out, you have taxes and risk up the wazoo, which is why I fought my wife tooth and nail not to do that!

I think we differ on this point. Others here have made the exact opposite argument and I've disagreed with them as well. Real estate in most areas of the US is a good investment. We are doing well as we've moved more into real estate. It's not a way to get rich quickly but it provides good income, nice tax breaks and steady appreciation. I don't think one can ask for much more than that.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

Hudson always seems to imply that if you are a rich "monopoly guy" and have $1 million you can go down to the rentier club and simply exchange that $1 million for $2 million risk free and repeat the process over and over.

If he or one of his itulip fans knows of how this actually works in the real world, I'd love to hear all about it. Whether you personally have the money or not, if you can find risk-free passive income (aka rentier)investments with a good return then you can make all the money you want.

The problem is that I'm not convinced this actually exists in the real world. In the real world investors bid up the prices of those type of investments until they don't offer low risk and high returns anymore.

[Polish_Silver]

Re: Hudson on the Piketty Phenomenon

Hudson always seems to imply that if you are a rich "monopoly guy" and have $1 million you can go down to the rentier club and simply exchange that $1 million for $2 million risk free and repeat the process over and over.

If he or one of his itulip fans knows of how this actually works in the real world, I'd love to hear all about it. Whether you personally have the money or not, if you can find risk-free passive income (aka rentier)investments with a good return then you can make all the money you want.

The problem is that I'm not convinced this actually exists in the real world. In the real world investors bid up the prices of those type of investments until they don't offer low risk and high returns anymore.

I think that's a very good point. I'll give two examples that do sort of work like Hudson's model:

1) hostile takeovers of the kind done by Bane capital/Romney
2) trading treasuries in a long term environment of lowering rates. You can use leverage and various
tricks to increase your yield.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

I think that's a very good point. I'll give two examples that do sort of work like Hudson's model:

1) hostile takeovers of the kind done by Bane capital/Romney
2) trading treasuries in a long term environment of lowering rates. You can use leverage and various
tricks to increase your yield.

Can you explain how hostile takeovers are a rentier type activity like Hudson describes?

[Polish_Silver]

Re: Hudson on the Piketty Phenomenon

Can you explain how hostile takeovers are a rentier type activity like Hudson describes?

I don't know what part of hudson's work you are referring to. But they do have the characteristic that an individual with liquid capital can deploy it to make large returns at the expense of the larger society.

Another of Hudson's complaints was that a landowner gets rich by sitting on land until tax paid infrastructure makes the land valuable. Then he sells for a profit which is due to the investment undertaken by the larger society. An example would be if you own land in the middle of nowhere, which becomes valuable because an interstate freeway intersection is built near there. This is far from the top of my worry list, since many of the people who benefit are middle class to start with.

A worry much higher up is this: there seem to be a group of people, which would include real estate magnates and bankers, which profit by blowing asset bubbles.
They enrich themselves by sucking money of the middle class and government.
This process seems to be sustainable. I don't know if Hudson talks about this or not.

[gwynedd1]

Re: Hudson on the Piketty Phenomenon

Hudson always seems to imply that if you are a rich "monopoly guy" and have $1 million you can go down to the rentier club and simply exchange that $1 million for $2 million risk free and repeat the process over and over.

If he or one of his itulip fans knows of how this actually works in the real world, I'd love to hear all about it. Whether you personally have the money or not, if you can find risk-free passive income (aka rentier)investments with a good return then you can make all the money you want.

The problem is that I'm not convinced this actually exists in the real world. In the real world investors bid up the prices of those type of investments until they don't offer low risk and high returns anymore.

Apply the logic to what he says. To paraphrase he says that you cannot drive someone lower than their subsistence in a sustainable way. He also says the surplus will move to the more wealthy. So it predicts that once the upper middle class is the only one of the general class to retain a financial surplus then they are next. So I think you are missing it by looking at it statically. I have been predicting that the "wealthy" will begin to consume each other for this reason.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

I don't know what part of hudson's work you are referring to. But they do have the characteristic that an individual with liquid capital can deploy it to make large returns at the expense of the larger society.

Another of Hudson's complaints was that a landowner gets rich by sitting on land until tax paid infrastructure makes the land valuable. Then he sells for a profit which is due to the investment undertaken by the larger society. An example would be if you own land in the middle of nowhere, which becomes valuable because an interstate freeway intersection is built near there. This is far from the top of my worry list, since many of the people who benefit are middle class to start with.

A worry much higher up is this: there seem to be a group of people, which would include real estate magnates and bankers, which profit by blowing asset bubbles.
They enrich themselves by sucking money of the middle class and government.
This process seems to be sustainable. I don't know if Hudson talks about this or not.

I'm referring to the concept of people extracting economic rents. I don't see how a hostile takeover really fits that.

Your second paragraph is basically what I'm talking about in a general sense. My point is that it's easy to make up a fictional scenario where people get rich by sitting on land. Certainly it happens in real life in some case although like you said the most famous situations involve the old woman who turns down millions for her tiny house so that a mall can get built. But to actually BE in the position of having lots of money and deciding "I'm going to buy a bunch of vacant land, pay the taxes on it and hope that one day someone builds a highway near it" is not quite the fool-proof rent-seeking scam that Hudson makes it out to be.

Put another way: Hudson seems to imply that if you're rich, there's free lunches to be had everywhere. But imagine you are a rich guy with lots of liquid capital. Michael Hudson calls you up and says "I know the system inside and out and I've decided that if you can't beat them, join them. Just give me your 10 million dollars and I'll make you even richer" Would you trust that he could do it? I sure as hell wouldn't.

I also believe there are scams robbing the public. I just see them in situations like Solyndra where taxpayer money is given to friends of those in power.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

Apply the logic to what he says. To paraphrase he says that you cannot drive someone lower than their subsistence in a sustainable way. He also says the surplus will move to the more wealthy. So it predicts that once the upper middle class is the only one of the general class to retain a financial surplus then they are next. So I think you are missing it by looking at it statically. I have been predicting that the "wealthy" will begin to consume each other for this reason.

I'm not sure how this relates to my post.

[Thailandnotes]

Re: Hudson on the Piketty Phenomenon

Harper’s Magazine associates Lewis Lapham and Thomas Frank have had their eyes on America and its moneyed rulers for a combined nine decades. In a conversation in late March at the Brooklyn bookstore BookCourt, the two talked about the current “Revolution” issue of Lapham’s Quarterly and named the forces conspiring to drive the nation into another age of upheaval. The discussion was featured in Frank’s column on Salon on Sunday under the title “Our Sad ‘Mad Men’ Revolution: How Consumerism Co-Opted Rebellion.”

To begin, Lapham, who says that as a journalist he has never been concerned with stoking revolution, describes the current issue of his Quarterly as taking on revolutions of various kinds—“political, scientific, technological.” To his mind, he says, those of us alive today are always in the midst of the revolution announced by Karl Marx in 1848, which is “the constant change in the means of production and the reducing of all human meaning and endeavor to a money transaction.”

Americans on both the right and left are anxious for drastic social change. Many are seeking to make it happen themselves. Lapham understands the evolution of civilizations, of which revolution is a part, to occur along lines determined by ongoing historical trends, including the breakdown of a society’s overextended parts in the manner that growing bubbles inevitably pop. “I suspect that if any genuinely revolutionary change takes place it will be forced upon us by a collapse of some kind in the system,” he told the bookstore audience. “That’s another form of revolution that you find across time where the civilization or the ancien regime falls apart of its own dead weight. And in the ruins, the phoenix of a new idea or a new thought or a new system of value takes its place. But that’s not something that can be organized by a committee or preached from a column in the New York Times, or even by a four-day conference about American values sponsored by the Rockefeller Foundation.”

“I don’t think we have to be concerned that we’re not parading around in the streets,” he added. “It will come of its own accord sooner rather than later.”

Frank added that he doesn’t “think Lewis is saying that [social order] will collapse on its own accord. Just that it will become corrupt… Everything else is up to us. To count on the dialectic to change anything or to rescue us is an absurdity. I think it’s a terrible mistake.”

In a chilling story about the limited vitality available to the American counterculture, Lapham described “the death of the Beat Generation in San Francisco in 1959,” which he said he witnessed. He was at the scene’s “last holdout” bar on a Tuesday afternoon. Beat figures John Kerouac, Ken Kesey and Allen Ginsberg were long gone. Out of nowhere a Hollywood producer, “dreadful looking … gold chain, white shirt, paunch, slicked back hair,” walks in and tells all the young, somnolent patrons he wants to cast them as extras in a movie. The pay was $50 a day each, but the boys had to shave their faces and put on khaki pants and blue button-down shirts, and the girls, tweed skirts. “One of you can still look dark and sullen,” the guy said. “This is a movie for Americans.” Everyone ignored him. Then he finally stopped talking.

“There’s a terrible, terrible silence,” Lapham recalled. “And then comes the even more terrible sound of a scraping of chairs. And the entire place emptied out and they were back in an hour, clean-shaven, white blouse, bobby socks. And that was the end of the Beat Generation.”

Frank, the author of “The Conquest of Cool,” a 1998 book about how capitalists subverted the mid-to-late 20th-century critique that it generates conformity by co-opting and commodifying the culture of rebellion, confirmed the meaning of Lapham’s story. “Individual economic leaders can be very stupid people. … But the system itself has a kind of genius. And what the system did back in the Sixties is it took the symbols of the counterculture and used them to reinvent itself. … By the end of the 1960s capitalism is this wonderful, sensitive, fantastic thing,” Frank said.

The conversation moved on to a recognition of the finance sector as a parasite “eating the brains out of the host” of the real American economy, “much of which has been outsourced in one way or another, or entrusted to machines.” Each time the economy collapses, Lapham explained, the foundation upon which it rests “gets thinner” as “the debt gets higher.” Frank recognized that the opposition located in today’s American left consists mainly of “journalists and bloggers,” lacking almost entirely the organized labor that “actually used to get things done.” Their enemy is not an idea known as capitalism, but simply an economic “mechanism” that goes by the name, which is captained and exploited by the leaders of “heavily entrenched interests.”

“The only idea that I can ever see in the minds of the moneyed interests is that money is good for rich people and bad for poor people,” Lapham said. “That’s about the beginning and end of their idea, I think.”

But what about opposition to economic selfishness masquerading as an idea? Where is the will to set things right? Lapham addressed himself to the genuine ideas that informed the values stated in the U.S. Constitution and their ability to survive in the atmosphere of moral and creative deprivation that enshrouds the country today.

“Civilizations, empires only last as long as there is a morale and an idealism and an energy sustaining it. To me, that seems to be exhausted,” he said. “There’s a good deal of cynicism. We don’t have enough people in this society who believe in democracy. That goes to your point about they’re there for the speech and then they leave for the rest of it. [Ralph] Nader has written wonderful books about this. He said, If a million people in the United States would give $100 and 100 hours of their time we could make truly significant change. But if you don’t have people who believe in it passionately it loses its energy. It dies according to the second law of thermodynamics. It’s a form of moral entropy.” Hence our present kind of civilization, “based on the global capitalist system of money,” faces virtually no external threat.

Among the conversation’s themes is the idea that capitalism threatens itself. One of the ways it does so is by continually abusing the population, of which many members are nonessential to its operation. Frank said that many of his young friends “supposed to be going out and starting life” carry over $100,000 in student debts. Lapham referred to the efforts of economist Michael Hudson, whose scholarly and popular work is concerned with the conversion of American citizens into debt slaves, as if democracy never existed.

http://www.truthdig.com/eartothegrou...ution_20140504

“That is how we will enslave the American people,” Lapham said. “I mean, the great source of capital, of course, is milking the American public on their debt. That’s how the credit card companies operate. You think of cattle in pens in California, the way they grow beef. You might as well think of the American population as giving off interest, stuffed with junk commodities and then paying forever with … just standing still.”

[vt]

Re: Hudson on the Piketty Phenomenon

The socialists have elites too:

http://news.yahoo.com/special-report...lTeh8AmifQtDMD

Sadly the working man and woman, and the poor are left out everywhere.

[Polish_Silver]

steady appreciation?

I think we differ on this point. Others here have made the exact opposite argument and I've disagreed with them as well. Real estate in most areas of the US is a good investment. We are doing well as we've moved more into real estate. It's not a way to get rich quickly but it provides good income, nice tax breaks and steady appreciation. I don't think one can ask for much more than that.

It's when land/home values are rising in real terms that it may be a very good investment. If home prices/rents are just tracking inflation, it is not that great, but small fish have limited alternatives. It also depends on whether you can do the maintenance yourself and a host of other factors. One of our friends in california bought a condo to rent out, and the tenant stopped paying rent and then started a fire in the kitchen. By the time they sold it, they were far behind financially. The whole problem of finding tenants who will pay the rent, and not trash the place, is such a huge problem.