Category: Economics
Doing over our kids

HousingtoIncome

The ever rising house prices in Australia show how stupid our policy makers have been.

We have increased our productivity. We have increased our wages. We have used the increase to buy our houses off each other at higher prices. Bankers made out like bandits. Now it is debt servitude or the rentiers life for our kids.

Australia borrows money from overseas. We’ve stuck it to our kids to benefit foreign financiers. It has also increased the cost of production in Australia. The land component costs more than it needs to. This is built into our cost of goods or services sold. We’ve undermined our international competitiveness as well as our kids future.

It did not have to be that way. It does not have to be that way.

Group think by incompetent politicians and public servants created this mess. They don’t have the nous to get us out.

Who will end our socialist left versus free market right stale fight?  Who will end the reflex rhetoric?

Nature abhors a vacuum. There will be a change candiate. There will be a party of change. It will not be one of the big four political parties. They are caught in their in their own credibility trap:

““A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.”

Probably best to think of them as a rotting carcass, good for fertilizing new more vibrant political life. The best thing they can do for the country now is to wither and die. Escaping their traps are, I believe, beyond them.

They will not. They’ll desperately cling to their power, prestige and pay packets. As for the national interest or greater purpose for their being in politics. What’s that?

Is this really what you want for your kids:

unemployed-march-great-depression

 
Mad as hell

mad as hell

Michael Hudson puts it well:

We’re at a turning point in history. If we don’t solve the problem of economic polarization, which is caused mainly by debt, we’re going to go into another dark age. We’re going to have neo-feudalism. We’re going to have neo-serfdom, except that you’re not going to be tied to the land like serfs were. You can live wherever you want, but wherever you are, you’re going to have to pay about 40% of your income just for housing. And you’re going to have to pay for water, and you’re going to have to pay for the other needs. This is the new kind of serfdom. You have to re-frame what the economy is about in a way that people can understand.”

Good Christians may ask what would Jesus do? For them “Forgive us our debts, as we also have forgiven our debtors” may ring a bell. Michael makes a good case that the debts referred to are financial debts. Read the linked post for more information in this. Michael also outlines how the forgiveness of all private individual debts, as opposed to debts between businesses, was a regular practice in ancient civilization. He even makes what was, to me, a new case for what caused the fall of the Roman empire:

The choice was: either you’re going to have economic renewal and restore people’s ability to support themselves; or you’re going to have feudalism.

That basically is how the Roman historians described Rome as falling. The debtors were enslaved, not only the debtors but just about everybody was enslaved, put in barracks on the land. Finally, you needed to have a population, so you let people marry and you gave them land rights – and you had slavery develop into serfdom. Well we’re going into a similar situation today, where I think we’re going into a kind of neo-feudalism. The strain of today’s society is as much a debt strain as it was back then.

It’s very funny: If you go into Congress – I was the economic advisor to Dennis Kucinich – you go into Congress and there’s a big mural with Moses in the center and Hammurabi on his right. Well, you know what Moses did? He gave the law. Leviticus, right in the center of Mosaic law, canceled the debt. What did Hammurabi do? Debt cancellation as well. You’re not going to see Congress canceling the debts like that”

The potential for mass debt servitude and serfdom is real enough. Hardly a day goes by without an article somewhere on housing affordability. Productivity improvements and of the entry of women into the workforce has done more for house prices than living standards. Retirement ages are being pushed out. Government services are becoming increasingly expensive or hard to get. New roads are increasingly toll roads. Formerly free university educations are increasingly being paid for amid increasing student debt. Formerly universal entitlements are becoming restricted and means tested. Yet taxes go up.

Economic activity and government revenue is increasingly being drained to service debt. Debt which grows at an ever expanding rate. How many more nations have to follow in the footsteps of Greece and Cyprus before we take a different path? How many more lives and businesses have to be blighted. How many people will never fulfill their potential, crushed by debt?

There is a flowing of new political parties. Western voters are crying “no more, this cannot continue”. Unless the new Parties address the fundamental debt cause, they will quickly go the way of the current establishment. People are voting for change. They are crying out for it. Blind Freddie can see it is overdue. Give it to them.

 

 
Jim Chanos on our times

Astute thoughts from Jim Chanos on Naked Capitalism:

“If we look at the events of 2016 — Brexit, the Italian referendum, Trump, and the rise of nationalist China — are these the harbingers of something bigger? Or are they just a coincidence?  The ground seems to be fertile for things to change globally. If so, does this give rise to a more nationalistic, protectionist, statist scenario?  Are labor prices going to go up again? Are we going to tax capital and emphasize wages?”

and

“If we’re in one of those periods now, if 2016 is like 1932 or 1979 — then you not only have to change your portfolio, you have to change your lifestyle. That’s one of the things we’ve been telling clients. If this is a major shift to populism, nationalism, greater state involvement, and less globalism, then you really have to rethink almost everything in your life.”

and

“I think Greece was sort of the Spanish Civil War to what’s about to be the EU’s WWII in that it was the opening preview of all of the problems that are going to come to the fore if Catalonia wants to become independent, if Italy wants to leave, if France wants to leave. The EU is being held together by chewing gum and string right now.

With this rise of nationalism  — if that’s what it is and it continues — the EU is going to find itself increasingly a victim of people wanting self-determination in northern Europe. That’s the first thing. Second is something I’m much more concerned about which nobody’s paying attention to, and that’s the continued rise of Erdoğan in Turkey. He has not only consolidated his power through a series of purges —thousands and thousands of journalists and academics have been thrown in prison since the aborted coup — but increasingly he is becoming more militant and Turkey is becoming a pro-Islamic state that is part of NATO. He’s throwing wild monkey wrenches into the whole Middle Eastern situation by making claims on land that was owned by the Ottomans, pre-WWI, like modern-day Iraq, modern-day Syria, and modern-day Greece and Bulgaria. He’s warned the EU that he will open Turkey’s borders to undocumented immigrants if EU membership talks are frozen.  Like Xi Jinping, he’s putting out these old maps and saying: this is our real land.”

and

“Both Eric Holder and Lanny Breuer of Obama’s Justice Department said in TV interviews and testimony that they factored in non-judicial aspects as to whether to mount prosecutions. I think that this had political costs to the Democrats. The crony capitalism still bothers people — the idea that Wall Street got off scot-free and they are still struggling. That lack of justice applied equally under the law was corrosive, not necessarily for Obama personally, but certainly for the party following him.”

and

“In modern times, the only two presidents that I can think of who really got their ideas and platforms enacted wholesale were FDR and Reagan. Everybody else has gotten compromised, or has had events overwhelm them.”