Posts Tagged ‘consumer debt’

Sleeping with the enemy…

January 26, 2010 Leave a comment

James Galbraith is at it again. Writing about the concession some progressives are willing to make on the need for deficit reduction some day in the future, he writes:

In reality, we need big budget deficits. We need them now. We need bigger deficits than we’ve got, to stabilize state and local governments and to provide jobs and payroll tax relief. And we may need them for a long time, on an increasing scale, and in the service of a sustained investment strategy aimed at solving our jobs, energy, environment and climate change problems. To pretend that expansionary policies are needed only for now, gives all this away.

Government needs to borrow big, because your credit limit has been reached – you’re maxed out:

The public deficit is just the obverse of net private savings. That is, when private credit is booming, investment exceeds saving and deficits tend to disappear. That’s what happened in the 1990s. When credit collapses, deficits return. That’s what’s happening now. Large long-term deficits will occur, or not, depending only on whether we succeed in generating a new growth cycle, financed by the expansion of private credit. Policies to cut spending or raise taxes — now or for that matter in the future — contribute nothing to this goal.

If Washington wants to balance its budget, it must make it possible for you to borrow more by providing relief on the debt you have already accumulated, because, you see,

… the economy works better and people are happier when they can borrow and invest privately. But if we don’t get them, the alternative isn’t a “return to fiscal responsibility.” It’s a choice between large public budget deficits that fund important and useful activities and tax relief, or large deficits because the recession, housing slump and high unemployment drag on and on, all made worse by cuts in Social Security, Medicare and other public spending.

Notice his use of the word, invest, rather than the more accurate term, buy another 42 inch high-definition, wide-screen television. If he had use the more accurate terminology at this point in his commentary, it would have been perfectly obvious to you, that you were being milked like a cow – a domestic farm animal, fed hay though one body cavity, and relieved of the mother’s milk of permanent debt servitude through another.

Government must run up a huge debt in those times when you cannot. James would rather you were the one to incur the debt, since the whole consumer mall walking experience makes you just gushy with various positive hormonal feedback loopy thingies. However, when you are permanently displaced because your job just went to Brazil, government must step in with its public credit card to fill the empty void.

What is silly about this entire argument, which we revisit again and again, is not merely that it is so incredibly stupid as to defy conprehension that it continues to be held by a grown man of Galbraith’s professional stature. What really makes it so astonishing is that the economists in the Messiah’s administration agree with all of Mr. Galbraith’s arguments, and still are pushing for deficit reduction.


Because, as Galbraith knows, Washington has absolutely no intention of balancing the federal budget, or even reducing the deficit – ever.  They just intend to spend as much of it on the military as they can. Which is why he threw dust in your eyes at the beginning of his commentary:

If you exclude Social Security and Medicare, there is no way to cut deficits seriously… except by slashing the Pentagon or by raising taxes. If you had to do something, I agree, those would be better moves. But good luck. It’s not a political battle one can win.

You see that’s James’ real agenda here – to misdirect you away from attacking the bloated defense budget as a battle you can’t win, and so direct you into a dead end, where, if you then argue for increasing the budget deficit still more to feed the hungry, and care for the sick, you can be isolated, marginalized and ignored.

When will progressives ever begin to see through these charlatans?

Six Minutes with the Renegade Economist – Michael Hudson Special…

June 18, 2009 Leave a comment

American consumer debt must be wiped clean, says Michael Hudson

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Dust ourselves off…and that Visa card too

January 27, 2009 Leave a comment

Obama Inauguration

With Washington’s 60 year old ponzi scheme on Wall Street broken, Barack is faced with the fairly difficult task of salvaging a bleak situation – as he indicated in his inaugural address:

That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land – a nagging fear that America’s decline is inevitable, and that the next generation must lower its sights.

It is this last point, “a nagging fear … that the next generation must lower its sights,” which goes to the heart of this crisis.

First, you are N. Gregory Mankiw’s penniless uneducated fucking hillbilly – living from paycheck to paycheck. You have no savings, no investments, no assets of any kind except – perhaps – the home you live in. You probably have a negative net worth, with perhaps $9,000 to $10,000 in various kinds of consumer debt. There is a good chance you are under water on your home mortgage, as are 12 million other American families – a figure which Roubini predicts will reach 25 million before the year end.

Second, you likely work for a company which has announced layoffs in the past year, or will announce them some time this year, owing to greatly reduced demand for goods and services you and your fellow penniless uneducated fucking hillbilly co-workers are providing because you are all so deeply in debt you can look to a long life of crippling struggle to maintain any type of income to provide food and necessities for your family.

Third, you live in a state where government is straining under the burden of greatly reduced tax revenues, and the probability of even more difficult fiscal problems owing to the fact that you are earning, borrowing, and spending less.

Roubini puts your situation this way:

Households in the US have too much debt (subprime, near prime, prime mortgages, home equity loans, credit cards, auto loans and student loans) while their assets (values of their homes and stocks) are plunging leading to a sharp fall in their net worth. And households are getting buried under this mountain of mounting debt and rising debt servicing burdens. Thus, a fraction of the household sector – as well as a fraction of the financial sector and a fraction of the corporate sector and of the local government sector – is insolvent and needs debt relief.

It is no accident then, according to Roubini that the country is experiencing its worst economic downturn since the Great Depression:

… The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession – with a sharp fall now in real consumption spending – now worsening. The fiscal actions taken so far (income relief to households via tax rebates) do not resolve the fundamental debt problem because you cannot grow yourself out of a debt problem …

It is perfectly understandable, also, that Barack has to address that other “nagging fear that America’s decline is inevitable…” since the continuation of the American empire rest on you continuing to use your credit card down at Macy’s.

Its all about consumer confidence, but you are not looking all that confident right now.

Well, its time for you to cast off that funk, ignore your misgivings, stop listening to your fears, and engage your logic:

According to Mr. Roger Bootle,This recession demands that we employ logic and spend our way out of it.

Where Barack demands, “Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America,” Mr. Bootle clarifies for us, that this is less a demand for dust free clothing, and more a plea we stop letting dust accumulate on our Visa cards:

A recession is a situation in which output, spending and income are all below normal or below potential. If output and income are to go up then someone must spend more. There is simply no other way. As a matter of logic. The only sensible debate is about who should spend more, on what, and how they can be persuaded to do so.

If you think in terms of aggregates, there are four candidates to do the increased spending: consumers, companies, the government, and foreigners. And for the world as a whole, there are no foreigners. So if we say that governments cannot be allowed to borrow more, because they are too much in debt already or because they waste the money, then we are left with only two candidates.

If we also say that consumers cannot be expected to spend more because they need to repair their financial position, then we are down to only one: companies. If companies could be prodded into increasing their spending on investment that could be a good thing. But in current conditions the chances of getting companies to expand their spending are slim. They react to the state of demand, which at the moment looks dire.

One can at least respect Barack on one point: Where Mr. Bootle implores us to return to our shopping, the Messiah more honestly frames the task at hand as work.

The difference is telling, don’t you think? Shopping focuses our attention on the product of our activity, the end result of our labors, and on the satisfaction of our needs, wants, and desires – fine dining, fancy cars, and 42 inch wide-screen high-definition plasma televisions.

Getting to work, however, focuses our attention on the effort and struggle of meeting those needs. It begins with want, and hunger, and ends that way as well – only when we switch from work mode to shop mode do we experience the pleasure and satisfaction we crave.

Which is why, on that bright blue morning in 2001 when madmen flew passenger planes into buildings for no good reason, the Moron begged us to go shopping.

Had he simply said, “Y’all git back to work, now. Ya’ heah?” we might not remember his years with quite the fondness we hold in our hearts today.

Unlike American economists, who conceal their profound hatred and disgust for you in arcane deeply mysterious symbology and tortured professional jargon, Mr. Bootle is rather breezy and forward with suggestions on how to fix this American decline:

Suppose we want increased consumer spending but do not approve of increased borrowing. The answer must be reduced saving. But I thought that we didn’t want that either! The logic is inexorable. To get higher consumer spending than would otherwise have been the case then collectively consumers will have to save less or borrow more. In the current environment, trying to boost saving is the economics of the madhouse.

Yes, it is insane for your to pay down your debt, it is insane for you to try to build a cushion against the loss of your job; it is insane for you to put money aside to educate your children, prepare to replace your car, or maintain your health care under the COBRA program – when you get laid off.

Stop saving and start charging!

I offer two morals and a suggested way forward. First, do not confuse the situation facing you as an individual with the position facing society as a whole. Second, do not confuse what needs to be done on grounds of equity or long-term economic health with what needs to be done to lift us from recession and prevent it becoming a depression. Some things which might contribute to the first objective would undermine the second.

There is a clear path ahead. In the short term, we must rely on an increased government contribution to demand through higher borrowing (although more by tax cuts, please) and increased consumer spending.

So, instead of reducing working time as the economy sheds millions of jobs, you need to get off your fat lazy ass and immediately go out and buy something – anything – with your Visa card today – it really is the only way to stem America’s decline.

And government should do the same – borrow flamboyantly and go on a – now – $900 billion dollar spending spree to create 4 million new jobs, at the cost of $225,000 per job.

A once in a lifetime Mother of All Shopping Sprees.

Or, to put it another way:

“Y’all git back to work, now. Ya’ heah?”

(The part of George W. Bush in this entry is played by Sheriff J.W. Pepper)

(The part of George W. Bush in this entry is played by Sheriff J.W. Pepper)