Cherchez la Verite: There are two forms of debt, public and private. Public debt is accrued by the government, and in the case of the U.S. does not have to be repaid (so long as the rest of the world continues to tolerate continued printing of more dollars). In fact, since the 2008 financial crisis, the U.S. (via the Fed) has printed $13 TRILLION(!) to bail out the big banks from their reckless mortage loans. Most of the private debt was socked on American citizens when the bank-created real-estate bubble burst. In the past, when there was a financial crisis the banks had to eat their losses, and private debts were written down to whatever the market could afford. But now the government is saying that there cannot be a market solution (because it would hurt its largest campaign contributers, the big banks). So the Obama administration and the Republicans are saying that more private debt (in the form of reinflating the real estate market) is the solution to the present "financial crisis." But in order to appear fiscally "responsible" the government claims that it should cut some part of the deficit ...and the only thing left to cut is Social Security, Medicare, and other social spending. But not only would this be stealing from the rapidly disappearing American middle class (whose payroll taxes have fully paid for these things), it would also be poor economics: As a result, the growth of private debt would grow to even more than the current 75 to 80 percent of family income, essentially shutting down all discretionary consumption ...whereas consumers consuming comprise 70% of the U.S. GDP. "We must destroy the village in order to save it"?

Monday, March 25, 2013

There are two forms of debt, public and private. Public debt is accrued by the government, and in the case of the U.S. does not have to be repaid (so long as the rest of the world continues to tolerate continued printing of more dollars). In fact, since the 2008 financial crisis, the U.S. (via the Fed) has printed $13 TRILLION(!) to bail out the big banks from their reckless mortage loans. Most of the private debt was socked on American citizens when the bank-created real-estate bubble burst. In the past, when there was a financial crisis the banks had to eat their losses, and private debts were written down to whatever the market could afford. But now the government is saying that there cannot be a market solution (because it would hurt its largest campaign contributers, the big banks). So the Obama administration and the Republicans are saying that more private debt (in the form of reinflating the real estate market) is the solution to the present "financial crisis." But in order to appear fiscally "responsible" the government claims that it should cut some part of the deficit ...and the only thing left to cut is Social Security, Medicare, and other social spending. But not only would this be stealing from the rapidly disappearing American middle class (whose payroll taxes have fully paid for these things), it would also be poor economics: As a result, the growth of private debt would grow to even more than the current 75 to 80 percent of family income, essentially shutting down all discretionary consumption ...whereas consumers consuming comprise 70% of the U.S. GDP. "We must destroy the village in order to save it"?

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March 25, 2013
Government Debt and Deficits Are Not the Problem - Private Debt Is

Michael Hudson: Why do they call for governments to balance the budget by pushing the economy at large deeper into debt, while trying to save the banks from taking a loss? -

Bio

Michael Hudson is a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971). His most recent book is "Beyond the Bubble."