Michael Hudson, how do we extricate the economic parasites from the main street host?

Comment I posted following the above youtube video speech by economist Michael Hudson.

by Glen Wallace

I still have some questions.  I guess my main question, from which all my other questions or concerns regarding Michel Hudson's philosophy, revolves around how to safely extricate the parasitic elements of FIRE (finance, insurance and real estate) from the main street host.  I  say, the parasitic elements of FIRE, because I think it oversimplifies things to imply that all of FIRE is a parasitic malevolent force on society.  But reading and listening to Mr. Hudson, it isn't entirely clear to me whether he thinks all of FIRE is parasitic or for what aspects are so, how do we go about the extrication process safely.  It would seem to me that we living in a much more complicated situation insofar the parasite and the host are sharing the same 'blood supply', so to speak.  Therefore, just yanking off the parasite could be very hazardous to the health of the host.  While the top 5 percent may own the bulk of stock equities, I think a lot more than 5 percent of the population own a significant amount of stocks, usually through their 401k's or 403b's and IRA's.  So any actions that has knock-on effect of crashing the stock market and a lengthy trough could be financially devastating to much of the remaining middle class population.  While maybe the markets and the economy could have let Citibank fall, I'm not so sure about AIG.  While lending may be currently tight, correct me if I'm wrong, but I believe there is still a great deal of small business lending going on with banks and credit unions providing loans for businesses very frequently.   However, if that lending were to really dry up completely as we were warned could have happened if not for the infusion of stimulus cash into the economy soon after the fall of Lehman Brothers, then wouldn't we be facing an economic crisis on a scale severe enough to lead to a civil emergency similar to a natural disaster?

Further complicating matters, isn't that there is a legitimate element to each area of FIRE.  How are we going to, in any parasite extraction process, separate any legitimate actors from the malevolent ones?  I'm not saying it can't be done, but we need to make sure we aren't throwing the baby out with the bath water, so to speak.  To take an analogy from the movies that I think has some realistic relevance to main street finance -- let's make sure we don't take measures that bring down the Bailey's Savings and Loan of the world while trying to go after the Potter's empire of the world, from the movie 'It's a Wonderful Life'.  And to take examples not from the movies but straight from today's economic realities -- in terms of a mass discharging of debt, that sounds nice for the students facing mounting student loans but it doesn't sound so nice for the current and future retirees expecting municipalities and corporations to meet their highly underfunded pension debt obligations.

I don't mean to be a naysayer but we need to come up with a plan where we have covered all the bases so that we can not only answer the tough questions, but also to get to where we are to trying to go.   Indeed, I'm concerned that if we were to implement a plan, for instance, that did crash the markets and dry up small business loans, then the parasitic malevolent elements would sweep in like the Potter character from the movie previously mentioned, and say to the effect "see, you were wrong all along, so from now on let me do the thinking and planning while I buy up all of your land and shares for pennies on the dollar."

I have all sorts of ideas myself for how to go about the parasite extraction process.  I think Bernie Sanders has some good ideas that are a good start, but I think we can safely be a lot more aggressive with progressive reforms than even he is suggesting.  For instance, I haven't heard Sanders even mention what I think we need to delve into and that is Federal asset taxes on corporations and the top one tenth of one percent of individuals.  That, and we need to access revenue from other novel sources as well such as a Wall Street high frequency trading machine transaction tax.  We can also get revenue from increased Tariffs and Excise taxes.  We should also be better leveraging revenue when natural resources are extracted from federal lands.  Personally I would rather Federal lands be preserved as much as possible in their natural state, but if it is already decided to sell some of the land's resources, we might as well do so in a financially responsible manner.  So, instead of selling off the rights to all the timber in a tract of Federal land in a no-reserve auction, sell the timber for the going rate per board foot just as a private landowner would.  Additionally, the US Treasury could bypass the private Federal Reserve, and increase the money supply by minting more coins in larger denominations.  Then all this new revenue and money could be used towards instituting an FDR type of civilian conservation corp like program to rebuild our nations infrastructure.  Additionally we will be needing a lot of revenue if we are to have any chance of making up for the looming pension shortfalls that, if not remedied, will be hard on not only the pensioners, but also the overall economy due to the resultant lowering of aggregate demand from retirees have much less dollars to spend in their pockets.  

Trump can't succeed in business even while trying, so how can we expect him to succeed as President?

By Glen Wallace

How can we expect Trump to solve America's wide ranging problems when he is so quick to say "I can't" when it comes to solving his own business problems?  After all, he is supposed to be a business specialist, and it turns out he is not so great even at that.  He has said "I can't" four times oven when asked if he can keep his failing business enterprises out of bankruptcy.  And contrary to his own claims, four bankruptcies is far in excess of a typical or average number of bankruptcies filed, if one is ever filed, by an entrepreneur like Trump.  And contrary to his claims that only large banks had to eat the losses from those bankruptcies, that is false as well.  Most, if not all of those bankruptcies involved bonds that the bondholders had to take a haircut on.  Very often, corporate bonds are held by a variety of ordinary citizens, including senior citizens that rely on the payments from those bonds for a very limited fixed income.

If he had to tell the truth under penalty of perjury and was asked "can you ever give a straight truthful statement about your weaknesses and failings when you're not under oath?" Trump would have to answer "I can't".  While still under oath, if he were asked if he were President, could he honestly put a plaque on his desk like President Truman did, that says "The Buck Stops Here", Trump would have to answer "I can't, because I 'm too much of a weasel, I like to weasel out of taking personal responsibility for what I say or do."

 Instead of trying to find ways to manufacture his shirts in the U.S., Trump just throws out more excuses for why he can't.  Did he even bother asking New Balance how they can manage to still manufacture shoes in the U.S.?  Did he try to figure out that if they can make shoes here, and Faribault Woolen Mills can make blankets here, and Red Wing can make boots here, then why can't I follow their successful models to make my shirts here?  I highly doubt it.  How can we expect him to explore ways to help the American worker as President when it doesn't seem like he is willing to lift a finger as a business man to avoid offshoring the jobs that make his shirts to foreign shores?  Trump couldn't be bothered by the unwashed masses other than finding the right buttons to push and strings to pull that get their emotions turned in his favor.

Representative Democracy as a Failed Experiment

By Glen Wallace

In NY Times columnist Nicholas Kristof column, A Failed Experiment, he points out how in the aftermath of Hurricane Sandy there has been a rush by the wealthy to equip their homes with backup generators as a workaround to a crumbling infrastructure that has led to frequent power outages in the NE.  While he is not entirely clear in his column what the experiment is that has failed, he seems to be indicating that it is our political system that has failed to address the problems of not only our infrastructure, but also crime, education, healthcare costs and climate change. (On a side note, I am still skeptical about the dominant paradigm of climate change, but I will leave that for another essay.)

In addition to not clearly stating what the experiment was that failed, perhaps out of the limits of space that the NY Times allots him, he didn't present a clear solution either.   Well, let me chime in on both accounts.  I will present the experiment that failed as the representative democracy that we and most of the western world lives under and a solution of a return, as much as is practically feasible, to a true democracy as was originally practiced and invented by the ancient Greeks. 

If one is to stand aside and think mindfully as an observer it should quickly become clear that there seems to be some inherent flaws to our representative system that are intractable.  The cause and nature of those flaws can be found by looking at basic human nature and psychology and the vulnerabilities therein that are easily taken advantage of and manipulated by certain vested interests in their interests.

One psychological tendency is to affiliate oneself to what could be called a clan, tribe or wolf pack.  We are inherently very social creatures and any perceived threat made by another group directed towards the group we identify ourselves as being a part of will frequently provoke an instinctual reaction to protect one's group and also fight the offending group.  Clan feuding or warfare, then, can quickly develop from seemingly small offenses.  Additionally, one could imagine it would be easy for someone knowledgeable about these human tendencies, to deliberately manipulate the masses by means of either engaging in false flag attacks or by pushing the emotional buttons and convincing one side that some act by the other side should be considered an insult.  In the group dynamics there is nothing more uniting than having a common enemy.  That unity is only strengthened the more the common enemy is despised.  I have become convinced, then, that the biggest ally for any political candidate is his or her biggest critic.  And the more outrageous that critic is, the greater the boost is for the target of that outrageous criticism.  Eventually the supporters start to lose touch and forget why they even support their candidate and merely focus on why they dislike the opponent and his or her supporters so much.  As a result, the supporters, the constituents, also forget, or demand, that their candidate, once in office, takes care of things like the infrastructure, education and health care costs.  All their energy is focused, as if under a trans like delusion, on the enemy clan as the root of all the ails of society and the world.   

Here in the US we have two main political clans and they go by the names of the 'Republicans' and the 'Democrats.'   And within each clan there are figures, the politicians, that take on patriarchal and matriarchal roles to the adult citizens who subconsciously want to revert back to comfort of childhood when they could always look to Mommy and Daddy to take care of everything.  Childhood was such an easier and simpler time for most that the lure of the comfort of that time makes it difficult to resist when a politician offers to effectively"kiss the boo boo and make it all better."  The elected official then is effectively offering to act in a parental role, where they are taking care of everything on a societal level, that the parent took care of, on a household level, when the constituents were children.  Most of us, as we were growing up, didn't have to occupy our thoughts with whether the roof was due for new shingles, or that the electric bill was paid on time or the myriad of other details of daily necessities of modern life.   So why, our reflex becomes, do we need to be concerned that our politicians aren't making sure that the infrastructure, the house of civilization, is being kept in good repair.  Sure, such questions may occur to us from  time to time -- especially during a crisis like Hurricane Sandy,  but as soon as the crisis passes, those questions quickly fleet from the forefront of our mind and become like a fictional story of history. 

The solution then, is to force upon ourselves the role of being the grown-ups that we of voting age are all supposed to be.  We can no longer kid ourselves into believing that the responsibilities of governing a society can be left in the hands of a few individuals that are confronted with a plethora of temptations while being afforded a level of ivory tower isolation that protects them from public accountability.   And the only way we can stop primal regression into feuding clans, is to come to dissolve our political clans and come to the realization that we are one big family with a lot of adults that are perfectly capable of sharing the burden of deciding how to run this country.  It is when we are faced with a true democracy, where every adult citizen gets an equal say in how things are run, that we realize we can no longer escape dealing with our adult responsibilities of dealing with things like infrastructure maintenance and repair.  And like a family all living under one roof, we will realize that there is no other acceptable solution than to find ways to get along rather than finding ways to fight each other.  There are already many examples where we as a society automatically realize that, when we are all together a one group in an enclosed space, whether it be an airplane cabin, an elevator, or a restaurant, that we must achieve a certain degree of civility that facilitates everyone getting along with each other.  I believe that same automatic realization of peaceful coexistence and cooperation will also kick in once we realize that in a true democracy we all have to work together as adults to come to solutions to all of our shared problems. 

In the future we will need wealth redistribution more than ever

By Glen Wallace

In regard to the Bloomberg interview with Ron Paul posted below, I don't think the citizens have ever expected the government to do as much as Paul says.  Congress and the president just keep on acting separately from the public and then just hold a popularity contest every 2 years to see who gets to stay or join up with the ivory tower that is capitol hill.  Who among the citizenry, after all, has demanded we have several hundred overseas military bases?  Not many, but the politicians go ahead and fund those bases, give out foreign aid and farm subsidies that most citizens are blissfully ignorant of, much less advocating for.

Also, I highly doubt that we are not as productive as we used to be.  I'm quite sure instead that we are much more productive than we ever have been.  It is just with every improvement in productivity, the fruits of those improvements have been going into fewer and fewer hands.  Unfortunately that regressive trend will likely continue where every job lost to technology will only represent a loss of income for the worker replaced by the machinery while the owner will just hang on to all the increased profits due to the total cost of ownership of the machine being less than the cost of the employee.  I don't see any other way to reverse the trend other than with the help of the government to force a fair redistribution of the nations wealth and bounty.

We are living in a fundamentally different time from when the constitution was written.  There was no such thing back then as the computers, robots and artificial intelligence that now or in the future could potentially replace the modern day equivalent of the colonial blacksmith, cooper, cobbler and every other position that was once held by a human being.  Without a government enforced fair distribution of wealth, how will a human be able to have any income in a world where there are no no longer any jobs that provide an income for humans?

Wealth Redistribution is Class Peacefare not Warfare

By Glen Wallace

Government assistance as it has been practiced in this country is clearly not a case of wealth redistribution as has been alleged.  If it were intended to be so, then those in charge of distributing the wealth have been doing a rather crummy job since it has been apparent that even as the prevalence of food stamps has greatly increased in this country the concentration of wealth in the hands of the few has correspondingly only also increased.  So if anything the opposite has been occurring whereby wealth ultraconcentration has been going on for decades in the US regardless of the POTUS and his political party affiliation.  And while the the wealth has been concentrating in fewer in fewer hands, the remaining masses left over have been left with less and less of the available material wealth.  It's not so much a merely a case of the rich getting richer and the poor getting poorer it's a case of everybody else besides the already rich getting a smaller piece of the pie.  What appears to be going on is that the government assistance is a case of the powers borrowing from the play book of the ancient Romans, and using food stamps and the like as the bread in the 'bread and circuses' plan to keep the masses somewhat content and less likely to rebel.  For the circuses analog, fortunately for the ruling elite there is more than ample entertainment distractions both passive and active ranging from video games to movies and TV to sports to keep the plebs distracted 24 hours a day.  It is rather clever of the rich elite to try to turn the tables and allege that government assistance is a form of wealth redistribution when in reality it is a method to prevent the masses from rising up and demanding a fair share from the wealthy in a true form of wealth redistribution.

A similar tactic is employed when allegations are made by some that demanding higher taxes on the wealthy is a form of class warfare.  I believe this 'warfare' baiting is being deliberately employed to both apply a unflattering label to the progressives and to try to get the progressives to think less of themselves engaging in activism since most progressives do not want to think of themselves as engaging in warfare of any kind.  But when looked at closely, the demands of the progressives or 99 percenters are nothing like warfare.  The requests instead, have been along the lines of demanding fairness by way of the peaceful changing of the civil laws.  There need not be any warfare.

All that is needed is to have laws enacted that allow for the transfer of funds from one account to another or the changing of names on titles from one name to another.  New taxes could be enacted that completely bypass the accounts of the IRS but instead revenue funds could go directly from, for instance, the cash accounts of large corporations to the accounts of a number of food shelves. In the process no blood was shed and no heads rolled as was the case with the French Revolution, which was a true case of class warfare -- I might add that I think that what the French Revolutionists did was an immoral, inhumane, brutal act when they coldly gathered all the members of the upper class and systematically ended their lives by means of the guillotine, all without even due process or assessment of character.  I'm supporting a true wealth redistribution by a peaceful, civil and legal means not just because it is the right thing to do but also to prevent a true class warfare situation as was seen with the French Revolution.

  I believe there is a certain amount of unavoidable scarcity on this planet and there is a point that is reached with any individual or organization where they necessarily end up taking out for themselves more than they every can be credited with contributing to the material wealth of a society through the increased productivity they may have activated.  I believe there is certain principle I like to call 'sandbox values', where when we were growing up we learned that while playing in a sandbox there is a limited number of toys to play with and we should learn to share those toys and not hog all of them for ourselves while all the other little boys and girls just sit there in the sand with nothing to play with while one brat sits there with a grin on his face with all the toys piled up behind him in the corner of the sandbox.  

We don't need a revolt, just an awakening.  People need to realize that gov assistance is not wealth redistribution but rather the old ancient Roman trick of using bread and circuses as succor to quell the rabble. The goal then of the ruling elite is just the opposite of what is being accused; government assistance is designed to prevent the people from demanding real wealth redistribution.  The democrats just coyly sit there allowing themselves to be accused of something that they have tried to prevent but should be a compliment - spreading the wealth around, while in reality both parties are together in the plot to further consolidate wealth.  That is the one constant that has existed for many decades now -- regardless of what party is dominating, wealth consolidation has continued unabated. 

 I propose a civil, peaceful legal system of wealth redistribution whereby a system of taxation is instituted that completely bypasses the IRS and instead mandates direct bank transfers from the super rich to the working poor.  Both individual and institutional accounts would be subject to these transfers such that corporations with large cash balances would also see significant outflows to individuals and organizations such as food shelves that actually need the money.  There would be no class warfare because there would be no warfare.  Instead these measures would be taken civilly as the result of laws enacted by a populace demanding such laws.  Most of the actual redistribution would amount to nothing more than a few electrons moving around and changing the digits on hard drives and computer screens.  The rich whose digits become smaller on their balance sheets likely would never miss them to any practical manner but oh what a difference it would make to those that have been struggling and now see a higher balance on their accounts.  

I think my proposal would be rather inviting to most, but you will likely never hear of it from a mainstream politician from either party or even a so-called liberal mainstream political commentator on the radio or TV.  You wont hear about such an idea because they are all part of the effort to help consolidate the wealth until nearly everyone becomes an indentured urban serf slave to a few bourgeoisie elite.