Michael Hudson: Interviews on the New Junk Economics

I just listened to these today. Good find. I am going to try to convert these to MP3 from youtube to listen in the auto. If I do I will post in here and can email them to whomever PMs me.

Great deal!

Obama's Republican Class War (aka. Clinton's 5th Term)
Michael Hudson

Guns and Butter
Wednesday, 03 February 2010

"Obama's Republican Class War Presidency" with financial economist, Michael Hudson, on Obama's State of the Union Speech and its economic consequences. The reappointment Federal Reserve Chairman, Ben Bernanke.

• Blocking Consumer Financial Protection Agency
  
• Pushed Bernanke's reappointment
  
• Hampering Glass/Steagle reenactment: Most problems arise from Clinton's repeal of Glass/Steagel, separating consumer from investment banking.
  
• Supporting Malthusian trickle down philosophy, coming down on side of FIRE economy predators, rather than production & consumption economy (bottom 90%).
  
• Hired same advisers that deindustrialized Russia, bankrupting that country
  
• Saving the bubble economy, not saving industry or jobs
  
• Left-wing media silent. WSJ has been only one exposing fraud.
  
• Freezing all but DOD & HFS spending - over time realizes that right wing will become constituency.
  
• Congressional Research Service: In 1979 richest 1% had 37% of Revenue from Wealth. This increased to 57% in 2004.
  
• Public can walk way from underwater mortgages, and should do so.
  

http://www.michael-hudson.com/
http://en.wikipedia.org/wiki/Michael_Hudson_(economist)


Essays by Professor Hudson:

http://www.counterpunch.org/hudson02012010.html "Obama's Junk Economics"
http://www.counterpunch.org/hudson02022010.html "The Bernanke Disaster"
http://www.counterpunch.org/hudson02172009.html "The Oligarch's Escape Plan"
http://www.counterpunch.org/hudson03272009.html "How the Scam Works"

Here are the MP3's for download

Obama's Republican Class War Presidency
Guns and Butter
Wednesday, 03 February 2010
Download MP3

With financial economist, Michael Hudson, on Obama's State of the Union Speech and its economic consequences. The reappointment Federal Reserve Chairman, Ben Bernanke.


The New Junk Economics: From Democracy to Neoliberal Oligarchy
Guns and Butter
Wednesday, 10 February 2010
Download MP3

Another terrific show with financial economist and historian, Dr. Michael Hudson. We discuss the Federal Reserve; money as debt; Fed Chairman Ben Bernanke's misconception of the causes of the great depression of the 1930's; classical political economy versus anti-classical, so-called "neoclassical", economics; the labor theory of value; the dollar carry trade; government deficit spending; Greece.

Economic Rent
http://engforum.pravda.ru/blog.php?b=347


All of classical economics was on the labor theory of value and the rent theory of pricing.

The ideal of classical economics was to bring prices down to the actual cost of production by financing the government budget essentially by taxing the economic rent.

The ideal from John Stuart Mill through Henry George, Thorstein Veblen and the entire progressive era in the United States was to base tax system on economic rent, on income earned without any enterprise, without any cost of production, to get the excess of rental value over and above the actual cost of reviving housing and office buildings, to tax monopoly rent, to tax broadcasting spectrum, to tax mining, to tax everything where the income was really created as an excess charge to what was provided by nature.

If the American tax system for the last 50-20 years had been based on taxing the property as it used to be then property prices would not have gone up.

If you had taxed the entire rental value of the property, the value of land distinct from the value of building, then you would have the government tax system keeping down the price of property to its actual value and you would not have had tax on labor as an income tax, you would not have had sales tax, you would not have had social security and health care tax.

The economic rent being an income without cost of production absorbs about 33-35% of the American economy. You no longer have national income statistics making that clear. They conflate rent with earnings and profit so you look at the national income and product accounts and when you look at the FIRE sector (Finance, Insurance, Real Estate) you have their rental income simply counted as earnings.

You can dis-aggregate these earnings into profits on building and the rent from the land simply by going to the Fed and making a distinction between the value of land and the value of buildings. You find that land represents over 50% of the actual value of real estate property.

If the income tax system had fallen on this economic rent and had returned to the FIRE sector then you would not have to tax labor at all. You would have the lowest priced labor in the world.


COMMENTS

Michael Hudson mentioned the concept of rental income as the important element of Gross Domestic Product.

Economic rent (WikiWisdom) is defined as an excess distribution to any factor in a production process above the amount required to draw the factor into the process or to sustain the current use of the factor.

Classical factor rent is primarily concerned with the fee paid for the use of fixed (e.g. natural) resources. The classical definition is expressed as any excess payment above that required to induce or provide for production.

• "A payment for the services of an economic resource which is not necessary as an incentive for its production"
  
• "Any payment that does not affect the supply of the input"
  
• "A payment to any factor in perfectly inelastic supply"
  

And ideological definition from a website engaged in promoting neoliberal superstition (the Economist, link):

RENT

Confusingly, rent has two different meanings for economists. The first is the commonplace definition: the INCOME from hiring out LAND or other durable goods. The second, also known as economic rent, is a measure of MARKET POWER: the difference between what a FACTOR OF PRODUCTION is paid and how much it would need to be paid to remain in its current use. A soccer star may be paid $50,000 a week to play for his team when he would be willing to turn out for only $10,000, so his economic rent is $40,000 a week. In PERFECT COMPETITION, there are no economic rents, as new FIRMS enter a market and compete until PRICES fall and all rent is eliminated. Reducing rent does not change production decisions, so economic rent can be taxed without any adverse impact on the real economy, assuming that it really is rent.

Neoliberal propaganda acknowledges the existence of economic rent but promises a heaven of no-rent economy. Unfortunately we are not aware how far we are from this perfect competition ideal status. Enormous estimated value of commercial brand like Nokia or Coca-Cola comes from economic rent, it is even computed as a rent. Bearing in mind this huge value of Coca-Cola brand perfect competition is not even on the horizon.

Gross Domestic Product is a sum of:

• labor income (wages);
  
• capital income (interest);
  
• rental income (rents).
  

Adam Smith was promoting this view on the composition of domestic economy (it was nothing new in the XVIII century).

Usually rental income makes up ~33% of the country economy. In Third World countries with monopolized economy rental income is closer to 40% of the national income.

Modern presentation of GDP never shows the country economy in this classical way (where the income comes from). Typical modern statistics show GDP as a sum of consumption, investment, government spending (national income by expenditure) or a national income by branches of national economy.

Economic rents in the Third World

GDP per capita in Third World countries colonized by foreign capital does not reflect the actual wealth of the country. GDP per capita is usually overestimated. The reason is that rental element of national income is often controlled by foreign capital. This foreign capital benefits from monopolistic rent in many sectors of economy. Monopolistic rent is usually transferred abroad using various transfer pricing techniques. This transfer can be very effective. As a result GDP may be overestimated by ~20%.

Various techniques used for transfer of wealth from colonies may make GNP – as opposed to GDP – also blind for this colonial exploitation.

The capital robbing national economy does not have to speak foreign languages as Russia proved in 90’s. In a chaotic legal environment and lack of power representing national interest even domestic capitalists may rob the economy and locate all profits in tax havens. Cyprus was for years the largest Russian investor. Pole position of Cyprus in the list of investors in Russia certainly confirmed Cypriot dominance in the world economy.

Wow!! Thank you so much.

Thanks C1!!!

Wonderful stuff!!

Thank you

Michael Hudson - Dress rehearsal for debt peonage
August 26, 2009












Transcript of a Bonnie Faulkner Guns & Butter Radio interview
with Dr. Michael Hudson (part 1)
Originally broadcast on August 26, 2009 on KPFA-FM radio in
Berkeley CA
http://www.blackagendareport.com/?q=print/content/dress-rehearsal-debt-peonage-guns-butter-interview-dr-michael-hudson-0


"...the government made a charade,
pretending that it was going to get some of the benefit from the bailout
of Wall Street..."


Bonnie Faulkner: Dr. Michael Hudson is a financial economist
and historian. He is president of the Institute for the Study of Long
Term Economic Trends, a Wall Street financial analyst and professor of
economics at the University of Missouri Kansas City. His 1972 book,
SuperImperialism, the Economic Strategy of American Empire, is a
critique of how the United States exploited foreign economies through
the IMF and the World Bank. He is also the author of The Myth of Aid,
and Global Fracture, the New Economic Order. Dr. Hudson has written many
articles on the current global financial crisis. A few of his most
recent articles that we discuss today are "Instead of Real Financial Reform, Obama Capitulates to Wall
Street [1]" “Bogus
Solutions To The Financial Crisis: The Latest in Junk Economics
[2]” and “The
IMF Collects Debt On Behalf of the World's Largest Banks [3]."

Michael Hudson, welcome.

Michael Hudson: Thank you very much, Bonnie.

Bonnie Faulkner:
The stock market is back up over 9,000, the Dow Jones Industrials, that
is, are over 9,000. To what do you attribute this?

Michael Hudson: The government has given $13 trillion dollars
to the financial sector. Now if you're going to give $13 trillion to the
financial sector, and flood the economy with money, obviously this is
worth something. Essentially the stock market is rising to reflect the
government giveaway.

Bonnie Faulkner:
We're reading that the banks that took the bailout money, that some of
them are returning the bailout money, what's with this?

Michael Hudson: When they originally got the giveaway from the
government, the government made a charade, pretending that it was going
to get some of the benefit from the bailout of Wall Street. You had
Warren Buffet, for instance, make a loan to a number of Wall Street
institutions and make a huge killing on it. The government also said “we
have stock warrants that say that if your stock recovers and you don't
go bankrupt, since we rescued you, we want to get something like what
Warren Buffet did.” But what they're getting is about one tenth of what
Warren Buffet did. The government has been utterly misleading and
deceptive in terms of saying what it's got. It says well “we've just
been reimbursed by Goldman Sachs and we made an annualized return of
23%.” The average reader will say, 23%, that's a lot of money. They
don't realize that not even a year has gone by, and the companies are
saying wait a minute, instead of giving you a share of our profits and a
share of the capital gains we're getting, we want to repay you now at a
very low price... so you will not get a share of the gains we have.

So they're paying the
government way ahead of schedule. The government is not using its option
to hold the loan and get much more later. It's essentially doing a
giveaway to Wall Street in letting Wall Street buy shares on the cheap
in itself... enabling the large companies to pay much larger bonuses.
The administration's aim is to increase, probably to double the size of
the bonuses they can pay on Wall Street by giving a windfall gain to
Goldman Sachs and Chase Manhattan and other firms by letting them cash
in. letting their expenses stop now. In fact the most recent cash-in was
saying well wait a minute, under th terms we negotiated which were so
much better than the terms that Warren Buffet negotiated, if we go out
and get private capital, and we can get private capital because you've
given us $13 trillion dollars, of course we're worth more, well you're
crowded out and you don't get anything.

So it turns out that the
money being repaid to the government shows how utterly corrupt the
bailout money to these private companies was. There's been a huge
transfer of resources to Wall Street, and Wall Street wants to make sure
it doesn't have to repay the government for the gift that it's got.

Bonnie Faulkner: I
was just about to ask you what the deal is with the banks now claiming
that they're profitable, because we all thought they were bankrupt. Have
they really become profitable?

Michael Hudson: Yes, they have. There's a difference between
profits and capital losses. They had a huge capital loss. It had nothing
to do with operating profit. You can be bankrupt and still make an
income. They had worthless garbage, worthless fictitious
mortgages and packages in their portfolios to back the deposits. They
were able to take about two trillion dollars worth of these junk
mortgages and exchange these at the Federal Reserve for actual treasury
bonds. This was the famous trash for cash tradeoff. They were able to
give their junk to the U.S. government, which now holds their junk.
That has solved their balance sheet (problem). Meanwhile they're very
profitable. There was an article in the Financial Times today to the
effect that banks are now making more money on late fees and penalties
and overdrafts than they're actually making in interest.

So they're making money
by increasing the cost structure of the American economy very strongly.
The more they can increase the cost of doing business to American
families and American companies, the higher their profits are. their
profits are directly proportional to how much they can raise the cost of
doing business and raise the cost of living to Americans. the
government has said (to them) raise the cost to Americans by enough to
make yourself profitable.



"...the new idea is to make money on the inability of the
customer to pay. fees, and finally they turn to the government to get
reimbursement..."


Bonnie Faulkner:
That reminds me of a friend of mine, someone who I know who has a line
of credit with one of the banks, it's a small amount. He had been
required on a minimum payment, this is a credit card, of 2% every month
if he just wanted to pay the minimum. Now he's just gotten a letter
from Chase saying well, you're going to have to pay the minimum of 5% a
month, or pay this off. So I guess they can just change the rules any
time they want.

Michael Hudson: Yes, that's in the small print, that they're
allowed to change the rules, and if the person does not pay the 5%, then
they have to pay very heavy late fees as well, and penalties. So Chase
can collect a lot more money from the people that can't pay. They
collect more by what is called predatory finance, making sure that they
charge more than the customer can pay. Their objective is to take every
bit of income from the customer's pocket and move it to Chase's pocket,
or Wall Street's pocket. That's their business plan.

Bonnie Faulkner:
What you're saying reminds me of something I read in the paper recently,
about why the banks are not foreclosing on properties to get the
thousand dollars or whatever they would get from the government to
rewrite the mortgage, because if they just string along, they make more
money off people going into default.

Michael Hudson: What they do is keep adding on late fees, so
that when the default occurs, they can claim reimbursement for all of
the late fees and nonpayments. Originally, banks made money off the
interest people paid on money that they borrowed productively. The idea
was that any profit or capital gain that the borrower gets, they turn
over to the banks. But now the new idea is to make money on the
inability of the customer to pay. fees, and finally they turn to the
government to get reimbursement for the mortgage including all of the
late fees and charges written into the mortgage.

Bonnie Faulkner:
Exactly, and this explains why there aren't more homes actually in
foreclosure, because they don't make as much money that way.

Michael Hudson: That's right.

Bonnie Faulkner: Today's new York Times reports "Guaranteed Bonuses Back on
Wall Street," and that Obama's "pay czar," a man named Feinberg wont be
able to affect most of these multi billion dollar guaranteed bonuses.
The NY Times article went on to describe what it called "talent wars"
in which the banks, bidding up the salaries of derivatives traders,
currency speculators and computer trading specialists, etc., so that the
salaries on Wall Street, at the top at least, are not just staying
where they were, but are increasing.

Michael Hudson: That's right, the contract they've made with their traders
gives them a guaranteed share of profits they make. Of course they're
not really profits, remember. If they were profits, they'd have to pay
taxes on them. Traders don't make profits, they make capital gains,
which are taxed at only a fraction of what wage earners (must pay) get.
Thus governments subsidize the traders, they subsidize the financial
parasitism by saying we want the economy to stop producing industrial
goods, to stop producing an income, we want the whole economy to operate
on a basis of capital gains, of trading everything back and forth.

This is the
post-industrial economy. You don't have to produce anything, and to
make sure that we make money by trading, we're going to count all the
trading profits as capital gains. Not only are they officially taxed at
only half the rate as earned income, wages and profits, but if you take
these gains and use them to buy yet more property, you don't have to
pay at all. As Leona Helmsley said, "Only the little people pay taxes."
Only labor and industry pay taxes, not Wall Street.

Bonnie Faulkner: Yes, her quote is one of my favorites of all time. Do you
think she went to jail because she was telling the truth.

Michael Hudson: No, she went to jail because she falsified her reports.
The fact is, had she handled things differently on an accounting basis,
her principle was right. She was cheating on her tax returns, it was
too embarrassing for the government not to throw her in jail. They did
agree not to throw her husband in jail.

Bonnie Faulkner: According to your article "Instead of Real Financial Reform, Obama's Plan Capitulates
to Wall Street" [1] you talk about a financial regulatory reform proposal of
Obama's that promotes Wall Street's product, debt creation, at the
expense of the economy at large, and lets financial chieftains continue
to self-regulate the debt industry, and by the way, to keep all the
profits from the past decades worth of fraudulent lending scot free.
Does Obama's plan make the Federal Reserve the sole regulator? What's
going on?

Michael Hudson: People he's appointed are the neoliberals from the Clinton
administration, who were advocating the repeal of Glass-Steagal in 1999
and led to all of these problems. Essentially his lobbying team
consists of Wall Street lobbyists. What Obama is being told is how do
we de-regulate Wall Street so that the government has no power at all to
regulate us or to tell us what we can do.

They've come
up with a brilliant plan. All you need to do is take regulatory
authority away from every government agency, and take regulatory
authority away from every court, and put it in the hands of the Federal
Reserve, and then put an ideological fanatic like (another) Alan
Greenspan in charge of the Federal Reserve who refuses to regulate, just
as Alan Greenspan refused to regulate. Wall Street, which for the last
hundred years has been against all regulation, calling it socialism,
thinks this is a wonderful idea. "Yes, yes!" they're saying, "this is a
wonderful idea! We want to be regulated by one financial authority!"
because they know that the Federal Reserve's role is to act as a
lobbyists (in government) for the commercial ban king system, for Wall
Street.




"Wall Street's product is debt, and it makes its money off
debt. It makes its money off collecting interest on debt in the first
place, and then collecting predatory fees and late fees and payments and
foreclosing when the debt can't be paid."


So by
appointing Federal Reserve bank regulator, you've appointed (the
industry's) your own lobbyist as the self-regulator, which means a
non-regulator. All you have to do is put someone like Ben Bernanke in
charge of the Fed and the Fed will tell Wall Street "do whatever makes
money, what's good for you is good for the economy" even if it's
strangling the economy, even if it's leading to higher unemployment,
even if it's de-industrializing the economy, and polarizing the economy
between creditors and debtors.

Bonnie Faulkner: Now you mentioned Glass-Steagal, and in this article of
yours, you point out that Paul Volkher was brought in as an economic
advisor for Obama's proposed reforms, and indeed the former Fed
Chairman, Bernanke's predecessor gave some good advice: reverse the
repeal of Glass-Steagal. What happened with this?

Michael Hudson: He was brought in for window dressing, because people had
respect for him. You want to bring in a group of people who are trotted
out as advisors. Then you ignore everybody's advice you don't want to
take. So obviously his advice is not being taken. In other words,
investment banking is not the same thing as commercial banking.
Commercial banking is supposed to be basically a public utility, not a
means of financing and making money. Paul Volkher said these two things
are just the opposite (of one another). As a matter of fact I had
lunch last week with one of my old Chase Manhattan friends who used to
work with Paul Volkher and he was reminding me of the differences in
philosophy between our generation and the new generation that has come
up which is somehow convinced that what's good for Wall Street is good
for the economy, although Wall Street's product is debt, and it makes
its money off debt. It makes its money off collecting interest on debt
in the first place, and then collecting predatory fees and late fees and
payments and foreclosing when the debt can't be paid. This is a
difference in generations by people who really didn't ever grow up in an
experience of a financial downturn.

Bonnie Faulkner: Since Ben Bernanke is the head of the Fed, should he be
the sole regulator? Why would Wall Street want Ben Bernanke as its
chief regulator?



"That's just
who you want regulating Wall Street. You want a blind policeman in
charge."


Michael Hudson: The reason why Wall Street wants Bernanke as a regulator
would be clear if you looked back at what he wrote in 2004. He gave a
speech that's on the Fed website to the Eastern Economic Association
called "the Great Moderation [4]" and he
also gave a speech to the Fed called '"the Great Moderation". Now here,
in 2004, he said that the period of the last twenty-five years, from
1979 to 2004 had been a great moderation, employment and output have
never been so stable. Look at the balance sheet from 1979 to 2004.
This is the greatest immoderation in American history. In 1979 you had
the wealthiest one percent of the people, as I think I've said in your
program before having 37% of the wealth. By 2004, they'd increased
their share of America's returns to wealth, that is interest, dividends,
returns to capital gains to 57%, and its about twice that by now.

Bernanke has
a blind spot. Although he's nominally head of the Federal Reserve,
which deals with finance, finance plays no role in his mind at all. In
order to be head of the Federal Reserve, in order to have a financial
regulatory position in the government, you have to ignore finance, you
have to ignore debt, you have to assume that debt is not a problem, only
a solution, and you have to assume that the financial sector adds to
the national output, not acting as an overhead, absorbing wages and
turning them into interest payments, absorbing corporate profits and
diverting corporate capital away from investment into interest payments.
You have to be blind to the effect of finance on the economy, and this
blind spot goes all the way back to Ricardo [5], who was the lobbyist for the bank sector in England after
the Napoleonic wars ended in 1815.

The blind
spot is inherent in the Chicago school of Milton Friedman and the University of Chicago monetarists.
It seems ironic that a school that should calls itself monetarist and
free market actually doesn't have any role for debt at all. It imagines
that money and debt really reflect the economy's earning power.

So in their
analysis, of the value of an asset, you take the earnings, the income
that it can pay, and you capitalize it at the current rate of interest
and you say "How much can I borrow against that amount of income. How
much can you borrow against a corporation that earns a certain rate of
profit. How much can you borrow against some real estate that earns so
much over taxes, and whatever banks will lend, they define as wealth.
So you define wealth in terms of how much a bank will lend, and how
much of this can be turned into interest and rents for Wall Street. Of
course if all the of the national surplus is turned into interest,
there's no money for rising living standards, there's no money for
increased capital investment, and the economy goes into depression, just
as we're going into.

That blind
spot is a precondition for (being appointed) head of the Fed. Bernanke
is a well-meaning fool, he doesn't know what he's talking about. That's
just who you want regulating Wall Street. You want a blind policeman
in charge.

Bonnie Faulkner: Are you saying that Ben Bernanke defines wealth as debt?



"...we're living through a transition from democracy to
oligarchy and the oligarchy wants the money for itself, not for the
people."


Michael Hudson: He defines wealth as how much an entity can borrow, which
is debt; in other words, its debt-bearing capacity.

Bonnie Faulkner: A quick follow-up on Paul Volkher. I've heard him roundly
criticized for when he was head of the Fed of course took interest
rates up to twenty, twenty-two percent and the claim has been made that
that caused the de-industrialization of the United States. Do you agree
with that?

Michael Hudson: It certainly stopped capital investment, because nobody
can invest when you have to pay twenty-two percent. What he did was a
response to the Vietnam war. the United States was running a huge
balance of payments deficit, it was running a large inflation, and if he
hadn't done that, raise the interest rates, living standards would have
risen in this country. Raising interest rates to crisis levels was
critical in order to prevent American living standards from rising.

The
government believes that the key to economic management is to reduce
living standards so there will be more money for the corporations and
companies to pay the banks. That's the working business plan of the US
government.

Bonnie Faulkner: That's interesting, because I was just about to ask you
why the government would not want living standards to go up.

Michael Hudson: Because politicians respond to the campaign contributors
they have, and the campaign contributors are Wall Street, the Finance,
Insurance and Real Estate (FIRE) industries, and they want the economic
surplus for themselves. They don't want it to go to labor. Essentially
we're living through a transition from democracy to oligarchy and the
oligarchy wants the money for itself, not for the people.

Bonnie Faulkner: Well, yes that makes sense, because if living standards
went up, then we'd be having the money to spend on ourselves and not
them.

Michael Hudson: That's correct.

Bonnie Faulkner: Getting back to your article on Obama's new financial
regulatory reform proposal, you write that this financial regulatory
reform that Obama is proposing has six major flaws. Do you want to talk
about some of those flaws? You say that one of the flaws is the
failure to give meaningful teeth to fraud reduction. And you talk about
the consumer financial products agency, and I guess we've talked about
that with regard to the credit cards.

Michael Hudson: It's more than that. When Obama bailed out Wall Street,
he thought, "are the people really going to take this, we have to give
something ostensibly to protect the victims of predatory finance. As
long as we're giving $13 trillion to predatory finance we have to give
something to its victims, so he said, not only am I doing the biggest
giveaway in history, not only am I tripling American's federal debt to
Wall Street, but I am setting up an agency to protect consumers from
predatory finance.

But all that
was was a proposal. Immediately the financial lobbies got in there and
said don't give this any teeth, make sure that they don't have any
power , so everybody, especially the Wall Street Journal is saying we'll
go along with the giveaway to Wall Street, but we don't want any agency
to protect consumers on this.. The belief now is that nobody's going
to be around to protect consumers.

Bonnie Faulkner: Another flaw that you saw in Obama's regulatory reform
proposal was the failure to reverse the shift to pro-creditor bankruptcy
laws.

Michael Hudson: That's right, for almost a decade the banks have pushed
what ended up in the 2005 Bankruptcy Act, which greatly increases the
difficulty of individuals wiping out their debt for bankruptcy. The
government is trying to make it impossible for consumers and homeowners
and wage earners and homeowners to ever get free of debt by bankruptcy.
Only the rich people can get rid of their debts. They get rid of their
debts by turning it over to the public sector and making the government
pay.

But
consumers are not supposed to get rid of their debt, so essentially if
you can't pay your debt we're moving into a society of what I call debt
peonage. If you buy a house and you can't pay the mortgage, the
proposals in the Wall Street Journal last Friday were that the
government can come after you for your entire life. You have to live in
a kind of debtors prison for the rest of your life in a Dickensian way,
except that you're able to stay at home instead if in prison to cut
the public costs, but you have to turn over all of your income to the
creditors to pay for the junk mortgage you've signed into, the
fraudulent practices of the last five years.

Bonnie Faulkner: I was going to ask you to elaborate on what debt peonage
would look like in this country, but I guess you've kind of done that...


Michael Hudson: Debt peonage
is when all of the surplus over and above basic needs goes to pay
creditors.



"The
financial sector realizes that it's broken the American economy, it's
time to take the money and run."

Bonnie Faulkner: That's a good definition...

Michael Hudson: In other words, you're able to live, but all the surplus
you produce, all that you earn, anything companies earn over and above
break even costs has to go to pay the interest to the financial sector.
It's what happened to the Roman empire and the result was the dark
ages. The problem is that creditors live in the short run, and they
tend to be parasites. It's just like in nature you have parasites. As
they tend to have evolved in good Darwinian style they usually end up
helping the host.

A good
parasite will say, I want to take the host's blood and nourishment but I
have to do something to help the host, I have to help it digest food or
find new sources of nourishment. An intelligent parasite in nature
doesn't take so much from the host that it kills the host because then
it wouldn't be able to have any more nourishment. it wants to keep the
host going. But at the very end of the process when the host is about
to die, then the parasite lays the eggs which hatch and devour the host.
That's the end stage. We're at this final stage of the credit cycle
now. The financial sector realizes that it's broken the American
economy, it's time to take the money and run. That's the stage of the
financial economy we're into. We're in the bailout stage,( where they)
take the money and run.

Wall
Street's just trying to get the government to take its trash for cash as
much as possible, to give it the bailout, and then it's moving that
money abroad as quickly as it can to buy resources abroad, to buy
foreign companies, to buy foreign debt, to buy foreign raw materials, to
speculate in oil and copper and steel markets, to drive up the prices.

Essentially
you're having the financial sector jump ship, realizing it's killed the
American economy, and figure out how much it can carve up the economy as
it takes whatever it can from (the wreckage of) the economy.

Bonnie Faulkner: What do you think this place is going to look like once
they jump ship?

Michael Hudson: I'm dealing with two countries which are sort of the wave
of the future, Iceland and Latvia, that have so much debt beyond their
ability to pay that the result for one thing is emigration. A lot of
Icelanders are emigrating, The people in Iceland and Latvia are running
down their savings accounts in order to try to keep trying pay the
interest on their houses that are falling in price. They're trying to
keep up living standards although their family members are being laid
off. First of all they dissipate the savings they have, paying them out
to creditors, and finally to survive they're leaving the country. So
you have depopulation, falling birth rates, rising death rates.

The IMF has
gone to Latvia which is the most seriously indebted of the post-Soviet
economies, and saying you have too many people who are using medical
care. They've just cut back the hospital budget by 50%, they're saying
you have to let the old people die. They've cut back the schooling by
50%. They say you cannot afford to educate your population. If you
want an education, you must leave the country. They're saying
essentially that Latvians have to cut their population by one third in
the next couple of years.

Same thing
for Iceland. One third of you have to lose your houses, have them
plowed under, one third of your people have to emigrate, in order to pay
essentially what we foreign investors want. We want your geothermal
resources, we want your hydroelectric dams. We don't want the people.
You have to run a budget surplus, not pay unemployment insurance, not
industrialize, not invest, you have to cut your education and medical
cost so that whatever you, the government extract from your economy you
have to pay creditors. That's the dress rehearsal for the United
States.

Bonnie Faulkner: If we're all going to try and emigrate, where will we go?

Michael Hudson: I don't know.






Part 2 of Dress Rehearsal For Debt
Peonage Will Appear in Black Agenda Report next week.

Download MP3
http://media.libsyn.com/media/blackagendareport/20090826-Wed1300.mp3

Dress Rehearsal For Debt Peonage, Part 2, a Guns
& Butter Interview with Dr. Michael Hudson

Theproduct of a banking sector, explains Dr. Michael Hudson in part 2 of this interview conducted by KPFA's Bonnie Faulkner, is debt. The business plan of America's finance and insurance sectors for the last generation and more has been to manufacture debt, collect ever-rising levels of rent, fees, interest and penalties, even to be bailed out of investments by the government with money it lends government, and finally to strip the assets of and privatize the public sector for its
own short-term gain.

Dress Rehearsal For Debt Peonage, Part 2 Transcript of a Bonnie
Faulkner Guns & Butter Radio interview with Dr. Michael Hudson
Originally broadcast on August 26, 2009 on KPFA-FM radio in
Berkeley CA
http://blackagendareport.com/?q=content/dress-rehearsal-debt-peonage-part-2-guns-butter-interview-dr-michael-hudson


"...Originally the income tax fell on the wealthy...
Only one percent of the population actually had to file an income tax
return...."


Bonnie
Faulkner:
One of the other points of Obama's financial regulatory reform proposal
that you say is a failure is the failure to deter credit default swaps
and other casino capitalist gambles. You point out that Mr. Obama
proposes that loan originators keep a token five percent on their books
only.

Michael
Hudson:
There's been a large discussion in the financial press over whether
computerized trading, whether speculative trading for instance in oil
and other products, whether the whole idea of default insurance swaps
and derivatives and gambling really helps the economy at all, or whether
it's really just gambling, and instead of which way interest rates or
exchange rates or stock prices might go, how is that different from
gambling on who's going to win the next baseball game, or win the next
horse race? The idea is should Wall Street be essentially conducting
all this activity by huge computers in trillions of dollars in
derivatives and bets as a way of making money? Is that really how we
want America
to make money? Or do we want the economy to make money by
investing in capital equipment and factories and farms that employ
people and actually produce something?
Wall
Street says well, wait a minute, when we're making profits by
essentially gambling on which way derivatives are going and which way
oil prices are going, we're buying oil not to use in gas tanks, not to
make energy out of, we're buying oil to make a shortage and drive up the
price so we can make a capital gain trading on it. We want to make
sure you give us a tax break on this. You may tax industries, you may
tax factories, you may tax people, but don't tax the winners, and by the
way, if we make a big loss and can't pay the winners like AIG, who
tried to insure the gamblers who lost, the government is going to come
in and they're going to pay essentially all the winners at casinos who
go bankrupt.
So
in the end everybody gets paid at the public expense from this kind of
gambling. Is that the economy we want? Obama's advisors say yes,
that's the post industrial economy, that's what we want.

Bonnie
Faulkner:
Another point that you make about Obama's proposal, one of the filings,
is the failure to reform the tax system that has distorted the
financial system to promote predatory extractive debt, not productive
industrial credit.

Michael
Hudson: The
tax system in America
has been under attack ever since the income tax
came in in 1913. Originally the income tax fell on the wealthy. It was
really a tax on the returns to wealth. Only one percent of the
population actually had to file an income tax return... if you earned
less than about $102,000 today, you didn't have to even file a return.
So the tax was paid largely by the real estate and financial interests
and the insurance interests.
Well,
for the last century the wealthy part of the population have chipped
away, they've paid lobbyists to write small print into the tax code that
favors almost every kind of income that wealth gets and that the bulk
of the population doesn't get, so what we have is a huge shift of the
tax burden off property, and off finance and on to labor. That's the
real problem.
What
has created this financial twist of our system, this distortion of our
system is the fact that absentee owned property is largely tax exempt.
Finance is tax exempt. Industry is not tax exempt and labor isn't tax
exempt, so we've turned America from a low cost economy into a high cost
economy, and by privatizing the public domain, we've turned what used
to be user fees or services produced freely like roads and
transportation into rent gouging exercises. We've sold off the public
domain and let buyers buy on credit railroads and other public
infrastructure, charge whatever the market would bear, raise the cost of
doing business, raise the cost of living, and because they financed it
all with debt, they count debt as a tax deductible expense, and they
don't have to pay income tax on money they pay out in interest. Instead
of favoring an equity economy, a savings economy, the tax code favors a
debt leveraging economy.
Let's
look at what's happening in California
for an example. California,like many other states has a budget condition where it has to be in
balance. Years ago, in the 1970s California
passed Proposition 13.
This limited the property taxes to a rise of only one percent a year.
Property values on the other hand, have risen from eight to ten percent a
year, and the effect of Proposition 13 has been a huge giveaway largely
to commercial property and to the property of the wealthy.
So,
unable to tax property, the free rent, California
has left all this
rental value of real estate, homes and office buildings, to be paid out
to banks as interests on loans taken out to buy the property. It costs
just as much to operate, to get a home, or an office building, or a
company under the low property tax (regime) today as it would have cost
under the high tax (regime) except that instead of paying a high
property tax that goes to finance California's budget and pay for
education the high costs go to pay the banks in interest. So California
has to make up the amount of money somewhere else by taxing labor and
industry and causing unemployment.
In
the final instance, when it's not able to tax property, what's it to
do? It cuts back on what used to be one of the best educational systems
in the country. It cuts back public spending, it cuts back medical
spending. The result is to reduce the California
state economy to debt
peonage, much as the position of Iceland
or Latvia.

Bonnie
Faulkner: In
addition to what you have listed, they;re gouging all the way down to
the parking meters, the sales tax has gone up, and a lot of the
infrastructure is going to be privatized.


Michael
Hudson: That
seems to be happening in Chicago
also, they've been privatizing parking
meters and everything. somehow, things that used to be free are now
being paid to private enterprises and the government can't raise funds
to perform its basic public sector duties. Then it has to sell off the
public domain to private buyers. Private buyers prefer to buy any kind
of public enterprise or rights, like the streets or parking lots or
roads, to turn them into toll roads, to put toll booths and parking
meters wherever they can all over the economy, over the electric system,
over the train system, the transport system, the airwaves.

"...the reality is that
debt isn't wealth, debt is debt,
the antithesis of wealth... That's like saying war is peace. "

What
the government used to provide in the progressive era...the public
infrastructure that made America
the most competitive economy in the
world, it's now loading down with privatized debt payments to the
banking system. Look (they say) at all the wealth we're creating! If
the government owned these roads it wouldn't be part of the private
wealth, which is all they look at. It would be part of the national
balance sheet. But once we sell it on credit to somebody who borrows
the money it's worth as much as a bank will lend against it.
That's
what I said at the beginning of the talk, that the value of a house or a
company or a toll road or a street that you can put parking meters on
is however much a bank will lend against it. The interest bearing
capacity of any asset is whats looked at as wealth. Well the reality is
that debt isn't wealth, debt is debt, the antithesis of wealth and
somehow there's been an inversion, a turning inside out or upside down
of the whole idea of what wealth is. Now the idea is saying that debt
is wealth. That's like saying war is peace.

Bonnie
Faulkner:
Isn't it also true that when the infrastructure is privatized, the
people that buy it are borrowing the money from a bank to buy it and the
interest they have to pay on these loans is tax deductible?

Michael
Hudson:
That's right, and in fact they may borrow it for themselves. For
instance in Iceland, Iceland had hoped that when it turned over its
geothermic power to AlCan and aluminum plants, that this would be a
natural resource and it would get part of the economic rent from the
cheap energy that it provides to make electricity. Basically, aluminum
is made out of electricity because it's made out of clay and clay is
everywhere but electricity isn't everywhere. Well it turns out that
AlCan arranged to borrow the money, to debt leverage the money from one
of its other affiliates in one of the offshore banking enclaves where it
doesn't have to pay tax and then it tells Iceland, well wait a minute,
we didn't make any profits. All the profit we had to pay as interest on
the loan we made to ourselves so we have no income tax to pay you. So
Iceland
is left somehow without getting any benefit at all from the
financial resource it thought was going to make it reach. so it turns
out they don't really have a natural resource, it's been stripped by the
banking and financial sector. That's what the banking and financial
sector has turned into across the world, in America,
in Iceland, Latvia,
all over the world the financial sector is asset stripping and income
stripping. It doesn't finance direct capital investment. It strips
away the income from investment, for natural resources, for land that's
already in place, and often supplied freely by nature.

Bonnie
Faulkner: To
sum up this financial regulatory reform proposal of Obama's what does
it consist of, will it have to pass the legislature, or what?

Michael
Hudson: The
agreement will have to rewrite the nation's regulatory laws. I'm hoping
that the Democrats in congress will say wait a minute, we're not even
going to think of turning over any regulation to the Federal Reserve
until you agree at the very outset... (to a ) consumer financial
products agency. We need consumer protection so that the massive
national subprime mortgage fraud, real estate fraud, financial fraud is
not continued, so the credit card ripoffs and predatory financial
practices will be stopped. That has to be the first order of priority.

Then,
instead of turning over all regulatory authority to the Federal
Reserve, and saying wait a minute, the Securities and Exchange
Commission (SEC) has just turned into a lobbying agency for Wall Street,
what the government should do is, say we don't want just one regulator,
we want more than one regulator. We want five or six regulators.
Unlike the past, we're not going to let companies shop around for the
stupidest, the dumbest, the most understaffed and underfinanced
regulator, they're all going to have authority.
So
(hopefully) you're not only going to have the Federal Reserve as
oversight, you're going to have the Treasury as oversight. You're going
to have the SEC, the Securities and Exchange Commission as oversight.
We're actually going to put teeth into these regulations (hopefully)
just as we had 70 or 80 years ago. Instead of de-regulating we're going
to put real regulators in charge of the regulatory agencies. We're
(hopefully) going to assign them a budget sufficient to give them enough
staff so that next time somebody turns in, in great detail, how someone
like Bernie Madoff is running a Ponzi scheme for $50 billion there's
going to be somebody on staff available to actually read the letter and
not just file it away under complaints in a filing cabinet, as was done
before.

" Reform today is
just the opposite of what reform meant in
the progressive era of America
a hundred years ago. Then reform meant
government oversight and checks and balances. Today the word reform
means getting rid of checks and balances... "

We're
going (hopefully) to actually have regulatory agencies that are run in
the public interest, not in the interest of Wall Street because
self-regulation doesn't work. And the Federal Reserve, as the lobbyists
for the banking sector, owned by the commercial banks, not by the
federal government. You don't (hopefully) have the lobbyists for the
financial sector acting as regulators any more than you have the
pharmaceutical industry in charge of the Federal Drug Administration...
you don't want them to be run by the industry and staffed by the
managers of the industries they're supposed to regulate.

Bonnie
Faulkner: So
then Obama's financial regulatory reform proposal hasn't gone before
the legislature yet.


Michael
Hudson: No,
he's still drawing it up and discussing things and his proposals are
giving the word reform as bad a name as it got in Russia under Yeltsin.
Reform today is just the opposite of what reform meant in the
progressive era of America
a hundred years ago. Then reform meant
government oversight and checks and balances. Today the word reform
means getting rid of checks and balances, turning over regulation to the
industries being regulated. It means exactly the opposite of what the
word reform used to mean, and we've entered a world of Orwellian
doublespeak.

Bonnie
Faulkner:
Yes, I think in your article you made the statement that instead of a
Roosevelt, we've got a Yeltsin.


Michael
Hudson:
That's right.


Bonnie
Faulkner:
Now with regard to this price-inflation bubble, the latest one of course
having been the sub-prime, you write that prices of everyone's property
went up. Of course so did people's debts. The problem is that asset
prices fall when the Ponzi scheme ends. But the debts remain in place.
That yeah, the prices of the stuff they bought goes down, but their
debt doesn't go down.


Michael
Hudson: What
it means is that somebody's bought a house for $500,000, and now they
took out a full mortgage for $500,000, but now the market price is only
$300,000. So there's $200,000 in what they call negative equity. Now
what are they going to do? Are they going to walk away, in what is
called "jingle mail," mail in the keys to the bank and say OK, we're
going to walk out of this house, we're going to buy the identical house
across the street for $300,000, and you've taken a $200,000 loss.
Well,
the government is trying to either tell the banks gee, you've made a
bad loan, we don't want you to lose any money cause you're our biggest
campaign contributor after all, we wouldn't be in office if it weren't
for your campaign contributions that we spent on television ads to get
people to vote for us. So we're going to split the loss with you, but
you're going to be allowed to add all of the late fees and penalties, so
in effect you won't lose a penny. You're going to be bailed out at
taxpayer expense. When people walk out of their $500,000 house and
leave you with a $200,000 loss, we'll give you $200,000 out of the
public debt and you'll be OK. By the way, we're changing the law so
that the people who bought the $300,000 house we can now sue them and
make them pay the $200,000 loss, make them pay the debt for the rest of
their lives. They won't be able to send their children to college, they
won't be able to go to the hospital when they get sick, we'll make sure
all that money goes to you...

“The
product of banks is debt. They make interest, they
make late charges and penalties and fees, and finally they foreclose on
property, they make management fees, and then they buy government, they
privatize government, and they get bailed out, and add the bailout to
the public debt,”

Bonnie
Faulkner: Is
that right, they're going to change the law to go after the people
who've walked away?


Michael
Hudson:
That's what the Wall Street Journal proposed last Friday, and it's what
the corporate lobbyists are trying to push in Washington.

Bonnie
Faulkner:
Wow. You wrote a very interesting article, "Bogus Solutions to the
Financial Crisis: the Latest in Junk Economics" in which you discussed
some of the summer book offerings, offering solutions to the financial
crisis. These solutions included regulating or eliminating derivatives
trading, instituting a token tax on securities transactions, closure of
offshore banking centers and their tax avoidance stratagems. Your write
"...No one is going so far as to suggest attacking the root of the
financial problem." What is the root of the financial problem in your
view? You kind of indicate it would be the tax deductibility of
interest.

Michael
Hudson: The
problem is that the debts are beyond the ability of the economy to pay.
That's why I've spent some time talking about Iceland
and Latvia.
When
you have a whole economy that can't pay its debts, then it has to pay
by running down its savings, by the government selling off the public
domain, or by people forfeiting their homes and other assets to the
creditors. The economy polarizes between creditors and debtors. That's
the financial problem itself.
The
root of the problem is that the economy favors debt leveraging as a way
of making money. It lets investors deduct the interest charges they
have to pay, but dividends are not tax deductible. So it encourages
debt financing rather than equity financing. Ever since the early
nineteenth century, the Frenchman
Henri St. Simone said that the problem
of economies throughout Western civilizations is that debts grow more
rapidly than the economy can grow. This is called the magic of compound
interest.
Any
rate of interest is a doubling time. If you leave a debt... and keep
reinvesting the interest, very quickly it doubles, it redoubles, it
quadruples. The economy doesn't grow that fast. Economies taper off in
s-curves, and in fact, the heavier the debt burden, the quicker
economies slow down and the more of the economic surplus is shifted out
of the hands of industry, out of the hands of people, into the hands of
creditors who use their interest income to load the economy down with
yet more loans and yet more debt. That's their business plan.
The
product of banks is debt. They make interest, they make late charges
and penalties and fees, and finally they foreclose on property, they
make management fees, and then they buy government, they privatize
government, and they get bailed out, and add the bailout to the public
debt, so that the whole economy is left without any surplus at all, and
then growth stops. That's basically the problem, is that the economy is
being run for the creditor class, not only the financial economy, but
also the tax system. Once the creditor class gets control of the tax
system... (it) un-taxes itself, un-taxes its customers, mainly landlords
and monopolies. Then you have the economic surplus not used to
increase living standards, not used to increase capital investment, to
increase productivity, not used to create the leisure society that
people expected they were going to get back in 1945... when economies
were pretty debt-free.
You
load the economy down with more and more debt, that stifles growth...
(Creditors) end up stripping all of its assets.... If you want to look
at the future of the United States
economy, look at what's happening in
Iceland, Latvia, and in what used to happen
in third world banana
republics that were strapped by debt.

Bonnie Faulkner:
Now with regard to the magic of
compound interest, a few years ago I bought an item at a store for $34.
I misplaced the bill and I ignored it. Within a year, the $34 charge
went up to two or three hundred dollars.

Michael
Hudson: That
wasn't simple interest, that was all the fees they added on. What used
to be looked at as simply a financial return on interest, the financial
sector has essentially got itself exempted from usury laws. You
mentioned before Paul Volkher raising the interest rate to 22%.
Interest rates were so high there that in order to borrow money, you
weren't allowed to under state usury laws, so states abolished all their
usury laws. Not only did they abolish (limits upon) the rate of
interest that could be charged, but they abolished (limits upon) all of
the side charges for penalties and late charges, and things, which is
how Indy Mac and CountryWide and the other predatory lenders were making
their money.

“The
way to get wealthy today is not by producing goods and
services, certainly not to work for a living and save, it's to make a
living by what the classical economists call rent seeking...”

Instead
of throwing the heads of these banks in jail and prosecuting them, the
government bailed them all out and made them billionaires. Instead of
taking them over and running them in the public interest, they left them
in private hands, and didn't even take the earnings that someone like
Warren Buffett would have taken from them. So what you have is a
travesty of financial regulation here. You have the economy being
regulated by the financial sector instead of the economy regulating the
financial sector. Something has to give. Either the financial sector
or the real economy, and the government is sacrificing the real economy
to the financial sector because they're the people who've bought control
of the political election and lobbying process.

Bonnie
Faulkner: In
"Bogus Solutions to the Financial Crisis" you go on to say that the
latest panacea being offered to jump start the economy is to rebuild
America's
depleted infrastructure. But you also see a deficiency in
this proposal. What is it?

Michael
Hudson:
Well, if the government were rebuilding the infrastructure like they did
in the 1930s, you'd be hiring people, you'd be putting them to work
like the TVA, the Tennessee Valley Authority, the WPA, the Works
Progress Administration, all of these other things. Instead, the
government is doing its version of what in Britain is known as the
public-private partnership initiative... selling off infrastructure on
credit to let private buyers come in and buyout the road systems the
streets and the parking meters, anything that's in the public domain,
and essentially charging whatever they want without regulation. So
America
is becoming a Thatcherized or Yeltsinized economy.

Bonnie
Faulkner:
Finally, you write that what economics really is all about is the debt
overhead; financial fraud and crime in general, military spending, a key
to the US balance of payments deficit, and hence to the buildup of
central bank dollar reserves throughout the world, the proliferation of
unearned income and insider political dealing.


Michael
Hudson: Adam
Smith called his book The Wealth of Nations because he was writing
about how to get wealthy. The way to get wealthy today is not by
producing goods and services, certainly not to work for a living and
save, it's to make a living by what the classical economists call rent
seeking, by what John Stuart Mill called the unearned increment. You
make money in a predatory way by getting something for nothing, by being
able to charge a price for something that doesn't have a cost of
production. You charge a price for land that you've been able to buy on
the cheap. You buy a parking meter patent from a city and you put
parking meters there. (It's) essentially to turn the economy into what
classical economists call a rent seeking economy, a toll booth economy,
where people get rich by charging for what used to be free.

Bonnie
Faulkner: Michael Hudson, thank you very much.

Michael
Hudson:
Thank you, Bonnie.

I wonder why he is "relatively" unknown; IOW, nowhere near as well-known as a Max Keiser, Peter Schiff, etc.-- when he is so obviously highly distringuished & knowledgeable, as well as seeming to be one of the last honest men on earth. (g)

The Fictitious Economy, An Interview With Dr. Michael Hudson
June 25, 2008 (Before the Crash)


Download MP3
http://http.dvlabs.com/radio4all/ug/ug417-hour1mix.mp3

Interview Transcript - part 1
http://www.blackagendareport.com/?q=print/content/fictitious-economy-part-1-interview-dr-michael-hudson

Interview Transcript - part 2
http://www.blackagendareport.com/?q=print/content/fictitious-economy-part-2-interview-dr-michael-hudson

Michael Hudson: The Financial Barbarians at the Gate
GUNS AND BUTTER
April 15, 2009
58min 43sec

Download MP3


"The Financial Barbarians at the Gate" with financial economist and historian, Dr. Michael Hudson. Europe; worsening financial situation and indebtedness; the history of banking and the criminalization of the banking system; tax policy; real estate asset inflation; US imperialism via the monetary system; neoliberal/neofeudal economics; classical political economy; finance capital breaking away from industrial capital; the financial crisis leading to a political crisis; similarities with the Roman Republic; what measures labor should take.

Having returned from Europe Hudson states that Iceland was declared a terrorist country by British and Russian counter parts and cleptocrats for consolidating the monetary system and grab land forcing basic feudalism. It appears, as Alex Jones indicates, the New World Order is a new rendition of the Old World Order.

I found the following streaming version of the above interview:
The Financial Barbarians at the Gate



I couldn't recommend this interview more strongly. There is so much material here, that it might take a dozen listens to actually start to understand it. I think I've probably heard it at least 10-times and am still picking up more. If you can't listen to the whole thing, than definitely start listening at approx minute 45 through to the end... it's great stuff.

For one idea of what to do next, Hudson, who is coming at this from a left-political-vector, says the following (start @ ~54mins)...

Restore following planks of classical economists.

1. Pay as you go Social Security. Pay it out of taxes, not out of our wages. A return to a progressive tax system. Hence, financing social security and medical care out of progressive taxation on the rich.
   
2. Raise on the Capital Gains Tax, at least as much as the tax on normal income, but preferably at a higher rate. Want companies to earn a profit by producing goods and services, but you don't want them to make capital gains by buying and selling other companies, and/or financial manipulations that create the financial capital gains.
   
3. Stop tax deductibility of interest payments, so that the economy is shifted away from a debt oriented economy toward an equity oriented economy, which is what was endorsed by classical economists.

Even though I realize that these suggestions all presume a continued socialist social model, I think it's interesting to get Hudson perspective, as it helps identify the problems and how the existing system has been manipulated against the publics interest.