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Michael Hudson may be a familiar figure to those of you who are either baffled or infuriated by the ongoing financial crisis. He can be found on his website, or sometimes on Max Keiser's show, denouncing the current economic mess. He always comes across as slightly exasperated, like a man who has been stuck in a traffic jam all day, and no wonder. Hudson talks sense in a world gone mad. This book is an excellent tirade against the follies of mainstream policy and economic theory. It's a lengthy book: its very badly proofread and unnecessarily repetitive, but sheds plenty of light on the financial crisis, and will help the reader to read between the lines of what is said in the mainstream media.
Central to Hudson's argument is that modern economic theory has abolished the distinction between productive and unproductive wealth, ie. tangible wealth and wealth extracted via rent, monopoly and capital gains. This is extremely important, since it renders the rentier class (who one never hears of anymore- I wonder why) as invisible (Hudson paraphrases Baudelaire, who wrote that the biggest trick the devil ever played was to convince the world that he didn't exist).
You may think that there is no such thing as a free lunch, but there is, and Hudson explains in detail why this is so. The tax system is structured in favour of property, finance and insurance (the suitably titled FIRE sector), and weighted against industry. The result is disaster: instead of `creating wealth,' the financial sector simply issues credit which is used to push up asset prices (mainly property), raising the cost of living, increasing the debt burden (as people borrow more to buy a home). This leads to what he calls `debt deflation': people paying down debts instead of buying goods and services.Read more ›
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Amazon is not showing it, but this book is now available on Kindle. Apparently Dr Hudson became aware of the "expense" complaints and thought getting it on kindle was a good idea.
He has a good summary on his blog where you can see the contents page which is an excellent summary by itself.
Dr Hudson's writings were initially hard for me to understand, but in taking the time to parse, absorb, and consider his facts and reasoning, he has filled a wide gap for me that existed between common sense and wrong-headed modern economics. I have long been suspicious of a lot modern economic ideas but did not have the expertise needed to clearly identify and logically discount the hogwash. By simply bringing common sense to economics Dr Hudson has blown my mind. I present this as praise for Dr Hudson, but it is really an indictment on the rest of the economics community that such a lone voice should rescue the "dismal science" from a sea of loonies. I have always thought classical economics was neat and interesting (if not overly simplistic and obvious) and that a lot of modern economics was being made overly complicated in non-productive ways (at best).
Those reviewers giving 3 stars seem to agree this book deserves 5 stars if the review were based on content. The price is 3 times less than college textbooks and places economics textbooks into proper perspective.
Dr Hudson is an economics and history geek who has been able to understand the ugly details of today's junk economics. He describes ideal economics by showing where junk economics is messing things up. He shows the big problem these days is that we are not writing down debts and printing money for main street or infrastructure.Read more ›
What makes the present financial crisis so unusual is best illustrated by the following quote from the book:
Discussing the 1857 financial crisis, Marx showed how unthinkable anything like 2008-09 Bush-Obama bailout of financial speculators appeared in his day. "The entire artificial system of forced expansion of reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominated values." Marx wrote this reductio ad absurdum not dreaming that it would come true in autumn of 2008 as the U.S. Treasury paid off all of A.I.G.'s gambles and other counterparty "casino capitalist" losses at taxpayer expense, followed by the Federal Reserve buying junk mortgage packages at par.
In Thomas Hardy's greatest novel Tess of the D'urberville's, the farm maid, Tess Durbeyville is seduced by the aristocrat Alec D'urberville. The tragedy begins when Tess believes that she is related to the great house of D'urbervilles. She is, but in fact it is the modern D'urbervilles who are the imposters, having assumed the name of an extinguished line of aristocrats. (Beware of what you believe about the world for it may become your destiny.) It is thus her naive belief that opens Tess to a fall, leading to her love for the moralistic Angel Clare.
As I read Michael Hudson's The Bubble and Beyond I kept thinking of Tess.
Tess lived during The Enclosure Acts, those which had impoverished all the English Crofters during her time. These Acts were, in a sense, the first move of 1% against the 99%--- removing land that had been available for centuries to any tiller of the soil and softening-up the Yeoman for their coming disinheritance by the industrialists, who would soon exploit their labor in London's “Satanic Mills.” Tess of the D'urberville's is in some ways a moral parable of the Industrial Revolution.“A Pure Woman”---who only wishes to live and love---is confounded by forces she cannot understand, powers which resound in Hardy's concluding irony: “Justice” was done, and the President of the Immortals (in Aeschylean phrase) had ended his sport with
Tess. And the d’Urberville knights and dames slept on in their tombs unknowing.”
Land is the original store of all wealth, thus a tax upon the ultimate store of wealth is the traditional resolution of the inequity at the root of every economic order---the relative scarcity or plenty of arable land.Read more ›