With every major financial recovery since the second World War beginning in a place of greater debt than the one before it, how could we not have foreseen the financial crisis of 2008? In this episode of Meet the Renegades, economics professor and author, Michael Hudson argues we did.

How could an economy that created so much debt also save the banks rather than the economy itself after 2008? Michael discusses the phenomenon of debt deflation and how the economic curriculum should change in education.

“If you’re teaching economics, you should begin with the relationship between finance and the economy, between the build up of debt and the ability to pay.”

Michael discusses the ‘Great Moderation’ – the image of a healthy economy in which job productivity was increasing, labor complacency was at an all-time low but reflected a terrible financial position. He argues that ‘traumatized’ workers were too in debt to fight for better working conditions leading up to the 2008 financial crisis, and how this reflects neo-classical ideas.

“A free market is where the 1% get to smash the 99% without any ability of the 99% to fight back; a free market is where people do what they’re told a free market is.”

What is un-earned wealth? Is all wealth earned wealth? Referencing John Bates Clark’s philosophy, being that un-earned income does not exist, Michael examines how these ideals are present in our economy today, which we see reflected in Wall Street and the ‘criminal class’. Michael explains where we see un-earned income or ‘economic rent’ in our economy today and how we’re trained to believe that this is the way it needs to be when in fact, it doesn’t.

“You don’t need intelligence to make money, all you need is greed.”

Michael offers a solution, urging the importance of writing down the debt and keeping basic services in the public sector, ridding the economy of financial tumours (the Donald Trumps of the world) through a proper tax policy based upon the this public sector model.

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9 thoughts on “Meet the Renegades: Michael Hudson

  1. Interesting comments about Greenspan – but utterly unsurprising.

    Hudson speaks absolute sense – the main problem we face isn’t Brexit or immigrants it’s BANK USURY.

    The populaces of countries such as the UK and USA have been so brainwashed (and that’s not hyperbole) into believing that carrying staggering amounts of monetary debt is normal – indeed, when it comes to the mortgage one is being ‘mature’ and ‘responsible’ in assuming this debt.

    We are living inside nothing less than a debt cult – and like all cults, its members are unaware they are such (as it has been normalised), and will not entertain an alternate view.

    The most distressing part is how the cult has been trained into believing that the design and production of goods is no longer necessary to build wealth – one hears the line’ we are a service economy now’ but this is nonsense – as it’s only the cheap credit (ie the usury) which is enabling the purchase of those services. The foundation for the production of real, sustainable wealth (as opposed to the transitory and illusory wealth effect of the credit card) has gone because the means of production has disappeared.

    And when the waves of cheap credit stop rolling and that tide goes out, we are REALLY going to see that we have been swimming naked for some time.

  2. John Bates Clark is the father of today’s neoclassical economics.

    His economics hides the distinction between “earned” income and “unearned” income made by the Classical Economists.

    The rentier class can’t believe their luck and give him their full backing.

    Most of the UK now dreams of giving up work and living off the “unearned” income from a BTL portfolio, extracting the “earned” income of generation rent.

    The UK dream is to be like the idle rich, rentier, living off “unearned” income and doing nothing productive.

    Today’s biased economics reveals what it was hiding.

    1. Michael Hudson has pretty much got it apart from the details of money and debt.
      It is not really the 1% lending their money to the 99%.

      Money and debt are opposite sides of the same coin.
      If there is no debt there is no money.
      Money is created by loans and destroyed by repayments of those loans.

      From the BoE:

      http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

      Fuller description:
      “Where does money come from?” Available from Amazon.

      You need to really understand money and debt, this leads to Minsky Moments and Debt Deflation.
      “Minsky Moments”

      1929 – US (margin lending into US stocks)
      1989 – Japan (real estate)
      2008 – US (real estate bubble leveraged up with derivatives for global contagion)
      2010 – Ireland (real estate)
      2012 – Spain (real estate)
      2015 – China (margin lending into Chinese stocks)

      Debt inflated asset bubbles.

      The work of Irving Fischer, Hyman Minsky and Steve Keen, each one build on the work of his predecessor.

      How to get out of debt deflation?
      Studied by Richard Koo after watching Japan for 25 years after 1989.
      https://www.youtube.com/watch?v=8YTyJzmiHGk

      Not forgetting markets have two modes of operation not one.
      1) Price discovery of rational investors
      2) Bigger fool mode when everyone rides the bubble for capital gains

      The US housing market was in mode 2 before 2008.
      The Japanese housing market was in mode 2 before 1998.
      The US stock market was in mode 2 before 1929.
      Mode 2 ends in the big bust.

      1. The link to the BOE paper is what I would call a stylized view of where money comes from… the paper inaccurately accounts for the nominal sources of currency. In doing so it perpetuates the myth of the importance of banking, which is what all central banks do.

        What is important wrt money creation is the spending it generates. Loans create deposits but economic activity is created by spending. If loans only created deposits they would be economically neutral. Deposits, if savings, are irrelevant. Economies are defined by spending, not savings, flows not stocks.

        So, if we look at money creation as a source of spending, governments create more of our money than banks. In the US for example, government spending over history totals about $80T while the current outstanding balance of private debt is around $47T.

        Income taxes should accrue against all sources of income (including business investment) but as a convention taxes accrue only against government spending in government accounting so that it appears that about 95% of the money remaining was created by banks. This is an artificial construct that is not consistent with the real world flow of funds.

        So, over history for the US at least, the federal government has accounted for way more spending than bank lending regardless of some artificial measure of where our currency originates.

  3. The “free market” is not the issue. The issue is the existence of both a huge government apparatus (a nexus for corruption and cronyism) and central banks (whose senior employees are unelected but weald enormous power).

    The number of people alive today who have lived through a period where “free markets” existed can be counted in the hundreds. Central banking is anathema to “free markets”: central bankers ‘set’ the price of credit, which is no different to a government appointed body fixing the price of potatoes on a periodic basis.

    1. the problem of laying the blame at the feet of the government and wanting to wish it away is that in order to have any market you need private property and therefore law. to have law you need institutions that make laws and uphold them and that is either a democratically elected government or “something else”….?

      may be this “something else” is the reason why the likes of Hayek were so fond of Pinochet and you can read anti democratic under tones from the likes of Eamonn Butler at the Adam smith institute.

  4. This is a great great interview but imo the end should not have been at all downbeat.
    Georgist tax reform has remarkable revolutionary potential as was proved when Lloyd George and Churchill pushed the House of Lords into committing veto-losing suicide to stop it (1910).
    If we introduced a tax system targetted exclusively at the unearned increment (with LVT at the core) then the entire game Hudson describes would end. The debt generating machine would have to stop if the economic rent of land (in particular) were socialised through taxation. (btw Earned wealth would be privatised through the abolition of taxes on wages, business and capital – this is not socialism.)
    This can be voted in. Lloyd George and Churchill (pushed by a mass popular movement all but forgotten today) kicked the door open and it remains our task simply to walk through ….
    Now, Georgism is a very peculiar thing politically – it gives both socialists and free-marketers what they want – a worker centred, commons-preserving, free market, meritocracy. So it can hardly be debated against and naturally unites progressives/socialists with libertarians/liberals. This needs to be spelled out.
    further reading: Mason Gaffney (The Corruption of Economics), Fred Harrison (anything)

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