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Interview Summary: Dr. Michael Hudson

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  • #31
    Re: Interview Summary: Dr. Michael Hudson
    Originally posted by Finster View Post
    Aug. 8 (Bloomberg) -- High school seniors in the U.S. know more about personal finance and the world economy than about reading or math, according to the first nationwide exam in economics...
    That surprises me. Considering how poorly the average American seems to run their personal finances, it's frightening to imagine how inadequate their reading and math comprehension must be.:eek:

    Originally posted by Finster View Post
    Personally I think schools should be focusing more on the reading and math. But regardless you run into the same kind of problem when you try to teach about personal finance as with human origins or sex education: Exactly whose ideas and theories are you going to teach?
    .
    .
    .
    Do people really need to put funds which traditionally might have gone into a bank savings account into the stock market instead? That's what personal finance experts would tell them.
    Yeah, you're right. I was being naive. I guess I was wishing that the education would focus on one key idea: if at all possible, don't spend money you don't have. But the powers that be would never allow it, as our entire system is built on debt.

    Originally posted by Finster View Post
    Real interest rates just have to be higher in order for capitalism to do its job and allocate capital properly. But we have a system that is designed to keep them low, often negative, at great cost to the economic viability of the United States. Its trade deficit is probably the clearest evidence of how serious the problem is. It highlights the gap between what the US consumes and what it produces. Artificially low real interest rates make it possible to profit merely by shorting the currency, that is, going into debt. That becomes a substitute for production, as vividly demonstrated over the past few years with the my-house-as-ATM effect. And more recently with the private-equity-hedge-fund wealth-through-leverage effect. Despite all the happy talk about our improving resilient economy, it's been exactly the opposite. That growing production-consumption gap means we're trading away real accumulated wealth and gutting the productive base of the United States.
    Well-stated as usual.

    On a lighter note, Saturday Night Live's Get out of Debt infomercial.:p

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    • #32
      Re: Interview Summary: Dr. Michael Hudson

      Originally posted by Finster View Post
      Real interest rates just have to be higher in order for capitalism to do its job and allocate capital properly.
      There are problems with the whole concept of interest. It is a very good short term tool -- but a very poor long term one.

      We also have to differentiate between debt for consumption, versus debt for investment (by this I mean the real meaning of investment -- that is investment for production capital)

      One of my mentors (now deceased) said that the problem with the concept of interest is that it does not allow for future generations to exist! It rewards current consumption at the cost of future existence.

      The primary flaw with the concept of interest is that continued real exponential growth or even linear growth is not possible on a finite planet. The debt soon outstrips the capacity to pay resulting in the declaration of bankruptcy by the debtor -- and a net transfer of assets from the debtor to creditor. This is one of the primary causes of business cycles.

      see Margrit Kennedy's Why Do We Need Monetary Innovation? Three common Misconceptions - Three threatening Results - Three possible Solutions.

      1. The Growth Misconception
      Money with interest and compound interest can grow forever

      2. The Transparency Misconception
      Interest is paid only when we borrow money

      3. The Fairness Misconception
      Everybody is treated equally in the system

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      • #33
        Re: Interview Summary: Dr. Michael Hudson

        Originally posted by finster
        Artificially low real interest rates make it possible to profit merely by shorting the currency, that is, going into debt. That becomes a substitute for production, as vividly demonstrated over the past few years with the my-house-as-ATM effect.
        profit from shorting the currency, i.e. going into debt, is obtained in 2 ways- using the borrowed funds to buy appreciating assets, or by having incomes grow beyond productivity gains. incomes have been stagnant for some time, unlike the 70's when the acronym "cola" [cost-of-living adjustment] became common. now that housing is on the way down, the only people who can profit from debt are those who can find a different rising asset. this reminds me of will rodger's stock advice: buy a stock and, after it goes up, sell it. if it doesn't go up, don't buy it.

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        • #34
          Re: Interview Summary: Dr. Michael Hudson

          Originally posted by zoog View Post
          ... I guess I was wishing that the education would focus on one key idea: if at all possible, don't spend money you don't have. But the powers that be would never allow it, as our entire system is built on debt...
          Here you've zeroed right in on the nub of the issue. Let's cast it as a question. Is the American habit of spending money he doesn't have some kind of congenital character defect, or is it a rational response to having been trained by long experience with high inflation and low interest rates?

          My argument is that it's the latter. In stating a couple posts back that "In order to avoid loss, the middle class must either spend on immediate consumption or put its savings in other places.", the inclusion of both factors was deliberate. Not only are we incentivized to put marginal savings into the stock market, but also to spend, spend, spend. Even to the point of spending in excess of one's earnings. This is how America's accumulated wealth is being transferred to producing nations and at least partly explains why economies like China's just grow, grow, grow. In saying that "our entire system is built on debt", you recongize that someone in this system is profiting handsomely off this flow. We can get clues as to where by looking to the Hamptons, Greenwich, the Cayman Islands, the District of Columbia...
          Last edited by Finster; 08-26-07, 12:13 PM.
          Finster
          ...

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          • #35
            Re: Interview Summary: Dr. Michael Hudson

            if we globalize out viewpoints, maybe it's all ok [said pangloss]. the rich of the world are transferring real wealth to the poor, who are working hard to earn it. it's like the the grandchildren of the wealthy frittering away their inheritances.

            so what if we have a trade deficit. hypohetically, perhaps virginia has a trade deficit with the rest of the country. do we worry about it? someone tell me why we should be so nationalistic in our concerns.

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            • #36
              Re: Interview Summary: Dr. Michael Hudson

              Originally posted by jk View Post
              the rich of the world are transferring real wealth to the poor
              Unfortunately, that is not how it is. It is the rich of the Rich Countries transferring wealth to the rich of the Poor Countries. The "not rich" of both sides get it on the chin! "Trickle Down Economics" does not really work.

              Comment


              • #37
                Re: Interview Summary: Dr. Michael Hudson

                Originally posted by Rajiv View Post
                Unfortunately, that is not how it is. It is the rich of the Rich Countries transferring wealth to the rich of the Poor Countries. The "not rich" of both sides get it on the chin! "Trickle Down Economics" does not really work.
                my impression is that in india it is indeed a small minority who are seeing better living standards, but that elsewhere in asia it is not just the rich who are benefitting.

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                • #38
                  Re: Interview Summary: Dr. Michael Hudson

                  My impression is that the upper middle class is extending downwards a bit -- but the bottom quartile is not coming up significantly. It is perhaps different in China because they started from a more even playing field (primarily because of the efforts of Mao Tse Tung & Co to brutally eliminate the Rich Class in the 40 years preceding "Liberalization"!)

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                  • #39
                    Re: Interview Summary: Dr. Michael Hudson

                    Originally posted by Rajiv View Post
                    Unfortunately, that is not how it is. It is the rich of the Rich Countries transferring wealth to the rich of the Poor Countries. The "not rich" of both sides get it on the chin! "Trickle Down Economics" does not really work.
                    I wouldn't use the term "trickle down economics", but I agree. And would amplify by saying that the rich are transferring out the wealth of the middle, creating more poor in America while getting richer in the process.
                    Finster
                    ...

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                    • #40
                      Re: Interview Summary: Dr. Michael Hudson

                      as long as 3rd world labor can be arbitraged against american labor, our income distribution will tend toward increasing resemblance to the income distribution of the rest of the world. the odd man out is europe, which as a matter of social policy has a more even distribution supported by higher tax rates and more regulation of the labor market.

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                      • #41
                        Re: Interview Summary: Dr. Michael Hudson

                        I don't know if you consider this adequate schooling!

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                        • #42
                          Re: Interview Summary: Dr. Michael Hudson

                          Originally posted by Rajiv View Post
                          I don't know if you consider this adequate schooling!
                          Wow. That's embarrassing.

                          Some people don't have to rely on an education to take them through life...

                          As a related off-topic observation about our pitiful geography skills in this country, today I was riding public transit, and two 20-something's in front of me struck up a conversation.

                          Girl: "I recently moved here from Vermont."

                          Guy: "Oh... that's in Canada, right?"

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                          • #43
                            Re: Interview Summary: Dr. Michael Hudson

                            To be fair to her, here is a follow up

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                            • #44
                              Re: Interview Summary: Dr. Michael Hudson

                              For a deeper look into this topic, I recommend a book by Kevin Phillips, Wealth and Democracy. He examines the concentration, dispersion and destruction of wealth throughout American history.

                              In one section he attempts to follow parallel histories of America with the Spanish, Dutch, and British Empires, in order to draw some general conclusions about imperial lifecycles. This section requires the heavy lifting that Phillips typically inflicts on his readers.

                              The rest of the book is a pretty quick read. Largely in line with EJ and Rajiv, and it is interesting to see these factors at work at the birth of the Constitution and in the 19th century.

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                              • #45
                                Re: Interview Summary: Dr. Michael Hudson

                                Wealth and democracy: A political history of the American rich
                                A book discussion and reception — Thursday, June 13, 2002


                                Kevin Phillips has been tracking the political and economic history of American wealth for a long time. Ten years ago his best-selling book on the politics of rich and poor influenced the 1992 elections. Phillips joined the Economic Policy Institute, the AFL-CIO, Campaign for America's Future, and The American Prospect to talk about his new book—Wealth and Democracy: A Political History of the American Rich—and how big money and political power are the invisible hand in the story of the American experience. Mr. Phillips was introduced by EPI Vice President Lawrence Mishel.

                                Listen to an audio transcript of the event (approx. 1 hour 12 min.):

                                [MEDIA]http://archive.epinet.org/real_media/020613/06-13-2002.mp3[/MEDIA]

                                I guess I am a skunk
                                Last edited by Rajiv; 08-30-07, 09:01 PM.

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