It appears what is called the case shaped recovery is permanently dividing the country and to haves and have nots and this seems to be acceptable for those who are the house. To discuss this and more im joined by my guest Michael Hudson in new york is a professor of economics at the university of missouri kansas city and author of through give them their debts and in bangkok were joined by steve keen hes a crowdfunding professor of economics on a tree on as well as a distinguished Research Fellow of the institute for strategy resilience and security of University College london gentlemen crossed up rules in effect that means you can jump in anytime you want and i always appreciate it ok let me go to michael in new york you know this just term the new normal. Bandied about and what really worries me is the people that use the new normal where its a normal that is beneficial to them ok and theyre not particularly concerned about it ok because i hear more and more talk read more and more about a cave recovery and that is that ignition defeat in my in my opinion because it means the if you have the k. Its the the leg of the k. Youve given up on ok because the upper part will pull the economy through because its to their benefit here i really worry when people talk about new normals and when they talk about the economy youre my friend well who has become normal since 2008 has been completely different from the old normal people have the idea of normal you go back to a balance but really the economy hasnt grown at all since the 2008 crisis all of the growth in g. D. P. All of the growth and wealth has accrued to the Financial Sector to the real estate sector to the one percent for the 99 percent of all theyve gone down and down and down so the new normal is you cant get rich again by housing and join the middle class like it goes through the new normal as an all of the year increase in wages and debt service in rents and in monopoly prices so that they mark the new normal is a market is going to shrink and shrink and so we look like greece looks up in the last 5 years the think of the normals looking way reduce debt deflation and rent this lady. Ok stephen im really glad that michael brought up the 2008 financial crisis as we have a reputation a reputation about it and that in this year where this was a artificially induced recession benefited the one percent you cant not keep stressing that year but what 202020 in 2008 have in common is that you have this massive transfer of wealth upward again upward again ok. And so again i mean my underlying theme in this whole program is that perhaps the country speaking specifically about the United States that michaels reference to greece is a perfect one i think youre basically writing off tens of millions of people america hundreds of millions of people in the western heads yeah i mean to do what were saying is a process where the wealthy who go will they go through debts and this is something which markland. Very very strong on and on a mathematical model. And one thing which came out of my modeling of whats called miscues financial instability cloth asus was that as a little of debt rose even when i had the capitalists borrowing the money and paying the interest on it the ones who actually paid for the our level of debt with the workers and the basic stories they had the residual income earners in a capitalist system so as the. Debt by the rich goes up the servicing shock goes up and it came at the expense of work as incomes and that turned up in the system as well and then in the response to the process. Mr know nothing about capitalism i know a lot about a blackboard model that i call capitalism which is bears no resemblance to the real thing this solution was to boost consumption is what they call the wealth effect and the wealth effect was to make shares go up in value and property go up in value and then people would feel wealthier and spend more the trouble is that doing that people are not putting him down to people with the wealth of bill gates and bill gates might buy one and soon it will a minimum and some of the vincis koda but he doesnt go shopping at kai not and thats what you need to get demand going up and its the poor youve got to direct the spending so we had a capitalist process that in previous inequality and then the response of the managers made that inequality worse michael did so go to the program oh i dont like the word transfer well you know were trying to transfer it well theres is that 10000000 families that were closures and of their own. The banks not a debtor its what theres been inflation of stocks and bonds and real estate under the tears that they are tears there was a trillion dollars so a save the economy a trillion was put into pushing up stop and are real estate prices and only 2 trillion was put into the socalled real economy namely in 1000000 of the corporate sector and a little bit in the labor so theres just that asset Price Inflation not incorrect or the one percent 00 already owned maybe 80 percent of the stocks and bonds in the country didnt transfer yet more they simply use the Federal Reserve to lower Interest Rates quantitative easing and vastly increase the price of housing in stockton by putting them further and further out of reach for the 99 percent you know we dont need to wait where is the real economy here i mean how relevant relevant and is it to that in the larger scheme of things because this is something i keep noticing too i mean i get up you know we can talk about math or numbers until the cows come home but that really has nothing do with whats going on particularly for average people going yeah i mean the average people are completely excluded from this was michael says they average person doesnt on shares he will get a bit of i could use in a strange expression his starting with the and ending with che but i but i once you get this argument that you know they benefit through their Pension Funds or sector centra with another percentage of the shares that unbiased would because as a fraction of the overall leadership your shares would be well under will ended with low single figures. The vast majority of inflation of asset process benefits the extremely wealthy not just the middle class but the extremely wealthy so the one percent or even the point one percent and what a quantitative easing did was boost stock prices by buying it. Trillion dollars worth of bonds for a year off the Financial Sector which meant they had a trillion dollars additional cash in turin that was less vaughns they couldnt buy bonds because the Federal Reserve was being the body of last resort so they bush is that drives up the ship process and that trillion of course i think introduces us to process maybe mole the net increase but the wealthy will sell and benefit from the sun go and then not buy the occasional gamble gaining in somebody to wash it for them and the result of that is you get a trickle of that trillion dollars of on his head of easy money turning out in the real economy so did benefit to some extent but rather than a multiply this was a fraction the laws are effects you put in one trillion into the wealthy maybe you get 50 to 100000000000 for the poll. Ok but you know its a real quick here and the term capitalism is been brought up here i really dont what he said he more ok in it a little slogan but what you just described here is that you had good reserve picking winners i thought thats what socialism this is that this is where theyre deciding who succeeds and who doesnt succeed this is this is a team yeah its because i actually are a god like this is the product of didnt if it was a local Central Banks stopped almost exclusively bought on the strength in the well they call the new possible school of thought and the new Classical School of thought fundamentally argues that capitalism is inherently stable so the government should get out of the why but they are in is the in the last 30 years theyve built models which ah good you can ensure troll the right of inflation by moving the right of interest washes fos effectively is the inflation rate is changing and that is stuff which is controlled by the Federal Reserve so in them models actually have the Federal Reserve as part of the system was supposedly a controller now its a control it leaves out the most important parts of the economy and mochel and i have this all the time they leave banks and it and money out of thin models and then a close thats not the real world its the real world behaves in a way thats for a while looks like its their model then goes completely gaga and they go gaga as well as i what can we do we can continue boosting share process because the wonder a conduit they have is from themselves to the Financial Sector so its easy for them to pump money into the Financial Sector if there was a conduit to the to the people through for example everybody having an account of the central bank and then not have been able to use that make an ism but they havent even set that up so its fairly again ill use one of the models to see if theyre giving food to the parasite and saying please share it with the house. Go ahead michael definitely vote your to use the word real economy the real economy that your return. It was what we used to call Industrial Capitalism but what steve and i esteem has just been talking about is finance capital is that and finance capitalism is completely different from Industrial Capitalism Industrial Capitalism in the 19th century seem to be moving to socialism because its more efficient to have the government provide Public Health and Public Education at a low price because then the capitalists dont have to pay their labor so much if the Government Supports their cost of living but finance capitalism wants to increase the price it wants the privatized education raise the price of the private housing it wants to not have access. Then once theyre really support the finance insurance real estate sector the Financial Sector and so who takes over the state. Libertarianism and neoclassical economics is a document some throw planning but they shift Central Planning away from the government and elected officials in the wall street and the Financial Sectors so were in a state of Central Planning that would have shot adam smith and all of the classical icon of us were Central Planning by banks and their interest is not that of Industrial Capital but this is the one bad news on what the upside goes only to a small say to a group of people and all the downside goes to well People Like Us we get i dont know but when things go really well they i believe transfer well it mean its a amazing mechanism we saw and it is this year comes here served as you know and you know the banks call up and they say this is what we want this is what were going to take ok what main street they dont even have a number to call go ahead you know thats the problem we are completely locked out from the Economic System of the whole rationale for Central Banks taking over Economic Management fundamentally which is what theyve done and the people like Thomas Sargent and and rather lucas unwrapping all the mainstream economists who push these models of capitalism is an inherent. Stable system theyve completely focused on the Financial Sector and ignore the real economy the real economy just you know try to troops along uneasy it will there be a mole thats on middle of what it was control the interest right so they have but the end product of this is fundamentally as he cites a windfall of socialism for the rich the close they are the ones who are being elevated by tactics like quantitative easing and now you can say the same thing happening again the in going this money going in to the Financial Sector which is driving up the stock market thats where the upper part of the chi come in strong and fundamentally that the problem here is that mainstream economists have not understood money creation but if youre running a central bank you know that you can put as many elements on the billions are true that those on the asset side and by would if you lock on the liability side so they have simply said were going to buy 10 trillion dollars worth of shares a few that is 10 trillion become our estimates the chantry cash gives you becomes a liability theyve got an infinite capacity to do that they can continue pumping the stock market up and its actually funny to watch trump crying about how well hes drawing it its actually the Federal Reserve the striving it up were going to jump in here gentlemen were going to break now thats a break well continue our discussion on the economy stay with marty. Welcome back to crossfire where all things are considered im Peter Lavelle to remind you were discussing the state of the economy. Ok let me go back to michael in new york we weve heard twice through the classical economy is the lead they claim that capitalism is inherently stable you know you guys are economists i mean whats stable about 282020 explain that to our viewers well for 2 centuries 18th and the 19th century almost all economists agree that a car economies are not stable because the Financial Sector is not part of the economy the Financial Sector grows by purely mathematical laws exponential interests and the amount of debt is stephen i traced mathematically grows much faster then the economy now grows much faster than the economy then youre going to have more and more of the economies and a spend on pain the banks for debt service and hang day you know monopolies at the bank support and less and less to spend on going to services and theres a crash thats what 0. 19 or economics is all about and thats why they wanted our money creation to become productive. But it hasnt been brought up most almost 80 percent of bank loans are real estate loans and the rest are for stocks and bonds banks one for Industrial Capital formation they dont lend to well his acolytes whitely dont need you to explain how they can make money quickly the financial time frame is short term you can make money much quicker without taking all the effort of building a factory and making a good and developing a marketing plan for it all before couldnt make it much quicker just by pushing up using your revenue to push a prius that price and pay dividends and pay everything out and so many percent of americas Corporate Income is used on stuff buybacks and dividends its not float into new Capital Formation thats why rhydian doesnt realize it now if you see america deindustrializing that is not stable thats an. Unstable and yet the industrialization pays for the one percent didnt just realization pays if you want to use all your money to make money in the stock market. And you really dont care about the real market that that is making us look like greece and leaving us debt ridden and without much of her ability to grow you make money and youre the one percent and you make money by having the 99 percent in debt to yourself and owing money to yourself then theyre not going to have enough money to buy goods and services from the factories and so fight is capitalism is where very different from the kind of Industrial Capitalism that have a smith and marx and every 100 years ago was analyzed you know so you know i know im not the smartest guy in the world after all im the show host but you know what you guys are describing to me sounds like an elaborate on c. Scheme i mean it there has to be a reckoning sometime somewhere and for someone or a group you know the ponzi scheme. That is certainly a huge pot of it i mean what would you have is unproductive investment which can only continue being service if you take up more debt to cover the whole its created by the way to make money out of the last amount of data you took on and actually i recommend one of these days getting richard vague on your show because richard doesnt expand his read a brilliant history called a brief history of doom and he can show you from inside knowledge what the euphoric behavior of bank is is when they get caught up in one of these now growing ponzi schemes but one of what i wanted to actually talk about is also whats so good about stability because when you think about it this stability we want is you dont want a system to break down but stability as the near classical stuff on it is effectively the same as being frozen to absolute 0 and nothing is changing whereas the most important thing about capitalism which distinguishes it from any previous social system is the right of china so in that since instability when it means you get china technological change social change and so on is one of the strengths of capitalism is just by sheer innocence happens stance that the nonce in century people who try to defend capitalism against mox focused on the concept of equilibrium as a modeling tool knowing that it wasnt relevant to capitalism was a shortcut for them but the 20th century economists who had no knowledge of their own history let alone the broader history of economic thought made equilibrium into a supposedly of the founding characteristic of capitalism and its is defining a character its christic of capitalism is as for snow who is of the sun but i think what theyve done its a myth and in search of that i mean if they are torturing the biblical enemy. So why did economists make this basic mistake steve is a mathematician is found if you believe in equilibrium automatically in the market then you dont need government so this whole idea of equilibrium was designed to prevent government from doing what government supposed to do protect the economy from. The rent seekers protect it from predatory bankers protect it from the real estate speculators that read that. Raise the rents take it from the privatizers that want to turn Public Services and the monopolies the idea of equilibrium is dont have government interfere let wall street allocate the resources and determine the policy not the government so all of this is is a logical. Advertisement for finance capitalism and for the one percent well you know that theyve been definition of stupidity is believing doing the same thing over and over again will give you the same the same results ok with different result i mean that is making the one percent rich of course its making because they like the results its kind of bring it down to real like you i mean one of the things and we look at 2008 and look at 2020 you know theres a lot of young people you know it was you know in 2000 and interesting the the workforce you know these the n. L. The double whammy now 2020 they havent recovered from 2008 theyre not going to create families theyre not going to be buying homes and big some of them cant even buy current so a lot of them are moving back in with their parents i mean what are the long term implications of this because thats where and you know introduction you know this is a model because sooner than half the country now people that work are irrelevant or a new can use it at that ok i mean this is the scary and when you have people that have no future and they believe they have a new future maybe what we do embrace of the right me as an idea is that id be very afraid of personally. You know thats thats the thing i mean if you look at the level of profit debt and thats the driving force of capitalism which michael and i both thought discipline which is completely emitted from mainstream a konami if you go back to not in the end of the 2nd world war that process of the dark Great Depression the 2nd world war reduced American Private debt by 75 percent when from about 100. 30 percent to about 40 percent of g. D. P. And then you had of course plenty of room for credit by stripping demand because there wasnt a great deal of debt Interest Rates were as low as they are now pretty much so the servicing call swallow so you could have growing Credit Demand you reach saturation to some extent with the business sector in the 87 crosses and then at that point the banks i was turning to houses to try to create still more debt to them than if walked out the housing sector another going for Student Loans car loans etc etc they got to the point where the target market is completely saturated with debt and contact on anymore so the engine is eaten its ok for mention theyll go for the pension yeah but you know it aint nobody can afford to handle any more debt right now but actually the corporate sector now has the last level of debt compared to g. D. P. In the history of american capitalism the housing sector is slightly below the 2008 take but theyre trying to get the house as a consumer borrowing but its needles not going anywhere because we simply dont have the capacity to carry them all parasites again selling monfils fries and thats where weve got to you richard end where you simply consequently more blood out of the real economy but you continue trying to do it the parasites themselves if they eat the host as middle of the mako the key thing about parasites is an order to eat those you have to take over the hosts brain you have to make the host think that the parasite is hard to be protected like a baby and it isnt the Financial Sector is it says you have if youre going to save the economy you have to give more money to the one percent the Financial Sector and the local down while theyre doing everything that and to prevent it from trying to lay down theyve taken over the brain and steve and i are not part of it weve somehow gotten immunity and you know were on your show where you go around the world together saying the same bank and. The world doesnt seem to change to make a long story short. Well you know when that when we looked at the react to the. Bailouts whatever you want to call it i mean obviously i mean they the politicians out there are a list there is no you can care right away i mean what is the naacp what is the age of the county roads all with the one percent i mean it need these Green Knowledge stations or assembly you know representatives i mean thats what they were or ok i mean well i think i think actually thats smop not i understood that but then again i get a lot of bankers that are very smart guy ok only brains doesnt get to the top of a system lack of morals gets to the top of the system oh youre not my uncle and i have too much in the way of morals to get to the top well you know it is greed. Sure. If theyve all swallowed a fish or economics textbook or my favorite answer this is actually the previous president obama because if you read his speech in 2009 when he came to power it was under bushs watch that of course the process began back in september of 2008 before the election but it went to become a power in february he gave a speech which said that people lost its difficult obama speaks people ask wheres my bailout and he says the truth is its the dollars given to banks can create an extra 10. 00 in loans to the private sector a Multiplier Effect that is straight out of near possible textbooks and he didnt know any better he only has a degree and lol he didnt have he done economics might even have swallowed it i hope hes critical enough not to have done so nobody nobody forced them to drink the kool aid thats why its there yeah and the koolaid isnt a classical economics textbooks are often they dont even know theyre doing something so stupid some of them a venal enough to know thats the cause of most of them have swallowed the audiology and theyre promoting the audiology which if it matched the system would actually be productive because its got nothing to do with the system it actually destroys a well if you have. 3 houses and a ham why should you care ok you get the last minute michael but i think obama know just exactly what he was doing when he invited the bankers and Goldman Sachs nearest to the white house and said im the only guy standing between you and the mob with. The mob with a pitchfork for the voters who voted for and the job obligation today is to deliver his voters to his campaign and thats what he did he didnt necessarily believe the new york classical economics they use it as a demo a fact is and as a pretense theres a Campaign Slogan and they know what they but they know whos supporting their loyalty is still there and triggers and just as we privatized weve privatized all attack certainly in america by turning it over so. Im really sick and tired of servitude and the g. O. P. In america talking about socialism because you know what everyone is going to end up getting. Ok i want to thank my guests in new york and in bangkok and i want to make our viewers for watching as you are to see you next time remember. Nuclear power plants have become a battleground in the u. S. In vermont people are demanding the shutdown of a local plant some like yankee is right now my focus because its a very dangerous prayer power plant the owner is attempting to run the reactor beyond its operational limit this case just sort of puts a magnifying glass on wheres the power in this country where is it going is it moving more towards corporate interests who or is it more in the idea of a traditional participatory democracy is or how are lie with the people this case demonstrates that struggle is a very real way. Class. And. I would. Not. Feel. Because. The president. Election. History. Listed a month to go before the next president ial election. History in the u. S. Troops there. Just some of the. Nothing but an excuse for sanctions. The prominent kremlin critic poisoned with. Its purpose is obvious denigrate russia with unsubstantiated accusations and thereby create a far fetched reason for introducing another tranche of sanctions against our country. Speaking at the Un Security Council about a controversial probe into an alleged chemical attack in syria 2 years ago. With britain chalking up europes highest death toll on the countrys. Factions Health Ministers praise for the governments handling of the crisis is called into question
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