#Instead of the poor indebted laborer I am

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Michael Hudson: Why Frances Coppola’s “The Case for the People’s Quantitative Easing” Is for Banks, Not the People

Digital Elixir Michael Hudson: Why Frances Coppola’s “The Case for the People’s Quantitative Easing” Is for Banks, Not the People

Yves here. I must confess to not having read Frances Coppola’s new book, but based on Martin Wolf’s and Michael Hudson’s recap of its thesis, I am at a loss to understand how Coppola could see her “people’s quantitative easing” as anything other than another subsidy to banks and bank lending. More and more economists have concluded that the level of financialization in advanced economies serves as a drag on growth. The IMF determined that the optimal level of financial development was that of….drumroll….Poland.

I am even more puzzled by her reluctance to let creditors bear the costs of poor lending decisions. Keeping them from eating their bad cooking would incentivize bad practices and help support poorly run institutions. None other than the Japanese warned the US early in the crisis not to repeat their mistake, which was failing to write down bad loans early on. But as Mark Blyth pointed out in a presentation that we featured yesterday, the 2008 crisis diverged from past major economic breakdowns in that the authorities have been able to prevent a reset and avoid a shift towards policy and institutional changes that strengthen the position of labor relative to capital. Despite its populist branding, Coppola’s scheme is yet another effort to shore up a status quo that is past its sell-by date.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “and forgive them their debts”: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year

This short book makes the obvious point that Quantitative Easing aimed at raising asset prices that helped keep banks solvent and enriched financial investors, but did not help the overall economy – the People. The aim – and effect – was to inflate asset prices for real estate, stocks and bonds, thereby saving banks from having to foreclose and suffer losses as property prices fell back in line with the ability to pay and with realistic rental values. So basically it was financial institutions and investors who were saved, not the economy and its debtors.

Who then are “the people” that Coppola advocates saving? I was disappointed to find that the main “people” that her “helicopter money drop” alternative seeks to help are banks. “The people” are only an intermediary, serving to pass most of the helicopter money on to their creditors. Her solution is “debt monetization,” a money drop that “would be used in the first instance to pay down debts” (p. 128).

The new money would flow right through the hands of “the people” to their bankers, although Coppola gives a hand-wave to the hope that: “Any money left over after debts were discharged would be given directly to the individual: they could either spend the money or add it to their savings.”

In Coppola’s reform, the first task would be to enable the economy’s debt overhead to be carried. But why not just write down the debts – especially the bad debts, the junk mortgages and junk bonds of zombie companies? Is it really desirable for the economy to keep providing the financial sector with more and more money to lend out? Isn’t that simply a means of keeping Ponzi finance alive and thriving? Coppola doesn’t pay much attention to the fact that without writing down this vast burden, economies will remain subject to financial overlordship.

For me, writing down the enormous post-1980 gains of the One Percent would be a real gain for “the people.” It also would promote economic stability instead of top-heavy financial liquidity claims on the economy. But Copolla worries that this would be unfair on an inter-personal level: A debt “jubilee could be every unfair to people who are too poor to have debts or too responsible to over-borrow.” Also, “for every debtor there is a creditor,” and the creditor class (a.k.a. the One Percent) would lose. “Somehow, a debt jubilee would have to avoid hurting savers,” she insists (p. 67). This means avoiding “hurting” banks and investors that have made reckless or outright fraudulent loans.

Coppola’s helicopter money to pay down debts thus would leave in place the top-heavy overgrowth of financial claims in today’s indebted economies – letting the ultimate debt deflation accumulate even further, to end in an even more necessary and deeper debt writedown as an alternative to the kind of mass foreclosures that the Obama era sponsored on behalf of the bankers (and to the great benefit of Blackstone’s real estate grab from the homes and properties liberated by the financial “free market”).

I cannot blame any author for not writing a different book. But monetary policy only can do so much. Purely monetary writers tend not to recognize that the debt overhead and FIRE sector constitute a rentier overhead that is distinct from the “real” economy, wrapped around it. Discussion of a fairer tax and regulatory structure, especially a tax on the FIRE sector’s economic rent, is outside the range of Coppola’s book.

Coppola attributes opposition to spending QE into the real economy instead of into the financial sector and its elites to “fear of government, and indeed of democracy” (p. 116). Indeed, she points out that “QE for the Banks had little democratic legitimacy, particularly in the EU.” Yet she claims that it is not true that central banks conducted this policy to benefit bankers. It is as if this were an unintended consequence.

Wiping out banking and other financial claims against debtors is to me a virtue of a debt jubilee, not a shortcoming. The economy cannot be stabilized without bringing the financial claims of banks and bondholders back in line with the ability to pay. Coppola’s helicopter money would subsidize the overgrowth of debt with a bailout that would need to be followed by an exponential sequel in the next crisis, and so on in ad infinitumuntil a moratorium finally was declared and debts written off.

The aim should not be to give people money just to pay the banks. The aim should be to help them get on with their real life in the real economy by writing down their debts so that such bailouts are not needed. Wouldn’t it be better to wind down this overgrowth? Why would we want to go along the road of exponentially rising bailouts in a charade of giving people money to pay banks that will have used the overgrowth of debt to search out ever more risky outlets, derivatives gambles, debt-financed private equity takeovers and LBOs?

Not to realize that this has become our economy’s financial dynamic is to be part of the problem, not part of the solution. Bailing out the financial sector feeds the growing debt overhead. Why would one want to do that – unless you belong to the One Percent?

  Michael Hudson: Why Frances Coppola’s “The Case for the People’s Quantitative Easing” Is for Banks, Not the People

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Washington Post Editor: Just Let White Working Class Die in Peace

They have thought it but recently a member of the media elite actually said it out loud.

Image Credit: Library of Congress Public Domain

Washington Post columnist and editorial board member Jonathan Capehart basically told white working class Americans they are better off dying than trying to fight for their life against a swelling tide of immigration and globalization.

“Economic dislocation and demographic changes are fueling discomfort and desperation among white working-class voters,” wrote WashPo columnist and editorial board member Jonathan Capehart, continuing:

While [university professor and author] Justin Gest says that both Republicans and Democrats have exploited these voters, he sees a way forward.

“The only way of addressing their plight is a form of political hospice care,” [Gest] said. “These are communities that are on the paths to death. And the question is: How can we make that as comfortable as possible?”

Professor Gest made no bones about his views of white working class citizens: they are a dying breed who are simply too dumb to understand that they need immigrants to revitalize they communities.

Declining towns need immigrants to reinvigorate their markets, take on unwanted labor positions, and add youth to aging demographies. Once these communities understood the benefits immigrants bring and were consulted about the terms of their integration, they would feel more comfortable with their arrival.

Capehart and Gest are both well aware of their rabid anti-white working class prejudice:

“It has become okay [among Democrats] to become classist against poor white people and the [white voters] see it,” said Gest.

The party’s coalition includes environmentalists, lawyers, Latinos, hippies, and electric-car drivers, Gest said, adding “there are many people in there who like the privileged status that the Democratic Party gives to certain ethnic groups.” For the party to welcome the white working class, he added, it would be “cheapening” the privileges given to others.

In other words, the Left doesn’t want to demean itself by appealing to people who do not meet their standards of virtue signaling.

So instead of appealing to them in any meaningful way, Gest suggests political suicide:

For many white working class people, and this is going to be controversial, for many white working class people, not all of them but many, you have a community of people who are advanced in age, whose skill set is for a different economy, who are living in communities that are losing population, losing resources, and so in many ways, the only way of addressing their plight is a form of political hospice care. These are communities that are on the paths to death, and the question is how can we make that as comfortable as possible …

A white working class voter offered this defense of her community:

Education can’t be the only answer for Americans if the U.S. labor market is also being flooded with cheap foreign workers, said a highly skilled worker contacted by Breitbart. “I know you don’t know me from a can of paint, but I had to throw in my 2 cents in your article about the WashPo editor,” said the woman, who tunes and operates computer-controlled machine tools in Cincinnati, Ohio. She continued:

I work in manufacturing. I have a high school diploma and a so-called associate degree from Wyotech that currently has as much worth to me as toilet paper (and it’s just as disposable). I am a [Computer Numeric Control] Machinist. I set up, tool, program, and operate CNC mills and lathes to make precision parts out of Teflon (polytetrafluoroethylene, that nonstick stuff on your frying pan) and can hold tolerances to +/- 0.0002″. So I’m wondering, since I am working in a field of a bygone economic era, how dumb do they think I really am that I need “more” education? What is more education going to do for me? So I can sit around and be a great do-nothing thinker as a white (non) working class individual? What is the threshold of intellectual satiation? How many degrees do we need to be indebted to the federal government before they deem the white working middle class smart enough to associate with people like THAT?

I have a hard time understanding how someone like Gest or Capehart can look down their noses at someone like me because I don’t share their desire for overpriced toilet paper. Could either of them program a machine to cut an arc into a piece of material? No, but I can. Could either of them change their oil, replace their brakes, or change their front differential fluid? (I’d be surprised if they knew where the dipstick is to even check it.) No, but I can. I’m a 35-year-old, white working class woman that could outsmart them on a common sense basis and on a highly technical basis, and somehow I am the one that needs more education?

People like that think that “working class white voters” is a descriptor of who we are as a socioeconomic group, with a dash of race and political functionality. “Working class (white) voters” are machinists, assemblers, machine operators, mechanics, nurse’s aides, waitresses, small retail store managers, bus drivers, taxi drivers, truck drivers, and all the jobs that they wouldn’t dare do themselves, being so much smarter than the rest of us (doubtful they know which end of a wrench to use).

Being a “working class white voter” does not make us inferior or intellectually stunted so much that we need to be (re)educated in liberally biased schools of doublespeak and thoughtlessness. All we want to do is work a good job that does present a modest challenge, that does feel rewarding, keeps the lights on and our bellies full and after all of that, we just want to come home, drink some beers, pet the dog and enjoy the sunset in our small suburban slice of heaven. For us, that is what life is all about. We don’t care about revolutions, microaggressions, or how many physical and economic descriptors we can apply to a sub group of a sub group of a sub group. People like Gest and Capehart are more important to themselves, like Narcissus was to his reflection; eventually, they will drown in their obsession. And when they do, they’re still gonna be at the counter of a Mom and Pop shop asking some “white working class voter” with grease on his or her face “What’s wrong with my Prius?”

[americanlibertypac]

Washington Post Editor: Just Let White Working Class Die in Peace

They have thought it but recently a member of the media elite actually said it out loud.

Image Credit: Library of Congress Public Domain

Washington Post columnist and editorial board member Jonathan Capehart basically told white working class Americans they are better off dying than trying to fight for their life against a swelling tide of immigration and globalization.

“Economic dislocation and demographic changes are fueling discomfort and desperation among white working-class voters,” wrote WashPo columnist and editorial board member Jonathan Capehart, continuing:

While [university professor and author] Justin Gest says that both Republicans and Democrats have exploited these voters, he sees a way forward.

“The only way of addressing their plight is a form of political hospice care,” [Gest] said. “These are communities that are on the paths to death. And the question is: How can we make that as comfortable as possible?”

Professor Gest made no bones about his views of white working class citizens: they are a dying breed who are simply too dumb to understand that they need immigrants to revitalize they communities.

Declining towns need immigrants to reinvigorate their markets, take on unwanted labor positions, and add youth to aging demographies. Once these communities understood the benefits immigrants bring and were consulted about the terms of their integration, they would feel more comfortable with their arrival.

Capehart and Gest are both well aware of their rabid anti-white working class prejudice:

“It has become okay [among Democrats] to become classist against poor white people and the [white voters] see it,” said Gest.

The party’s coalition includes environmentalists, lawyers, Latinos, hippies, and electric-car drivers, Gest said, adding “there are many people in there who like the privileged status that the Democratic Party gives to certain ethnic groups.” For the party to welcome the white working class, he added, it would be “cheapening” the privileges given to others.

In other words, the Left doesn’t want to demean itself by appealing to people who do not meet their standards of virtue signaling.

So instead of appealing to them in any meaningful way, Gest suggests political suicide:

For many white working class people, and this is going to be controversial, for many white working class people, not all of them but many, you have a community of people who are advanced in age, whose skill set is for a different economy, who are living in communities that are losing population, losing resources, and so in many ways, the only way of addressing their plight is a form of political hospice care. These are communities that are on the paths to death, and the question is how can we make that as comfortable as possible …

A white working class voter offered this defense of her community:

Education can’t be the only answer for Americans if the U.S. labor market is also being flooded with cheap foreign workers, said a highly skilled worker contacted by Breitbart. “I know you don’t know me from a can of paint, but I had to throw in my 2 cents in your article about the WashPo editor,” said the woman, who tunes and operates computer-controlled machine tools in Cincinnati, Ohio. She continued:

I work in manufacturing. I have a high school diploma and a so-called associate degree from Wyotech that currently has as much worth to me as toilet paper (and it’s just as disposable). I am a [Computer Numeric Control] Machinist. I set up, tool, program, and operate CNC mills and lathes to make precision parts out of Teflon (polytetrafluoroethylene, that nonstick stuff on your frying pan) and can hold tolerances to +/- 0.0002″. So I’m wondering, since I am working in a field of a bygone economic era, how dumb do they think I really am that I need “more” education? What is more education going to do for me? So I can sit around and be a great do-nothing thinker as a white (non) working class individual? What is the threshold of intellectual satiation? How many degrees do we need to be indebted to the federal government before they deem the white working middle class smart enough to associate with people like THAT?

I have a hard time understanding how someone like Gest or Capehart can look down their noses at someone like me because I don’t share their desire for overpriced toilet paper. Could either of them program a machine to cut an arc into a piece of material? No, but I can. Could either of them change their oil, replace their brakes, or change their front differential fluid? (I’d be surprised if they knew where the dipstick is to even check it.) No, but I can. I’m a 35-year-old, white working class woman that could outsmart them on a common sense basis and on a highly technical basis, and somehow I am the one that needs more education?

People like that think that “working class white voters” is a descriptor of who we are as a socioeconomic group, with a dash of race and political functionality. “Working class (white) voters” are machinists, assemblers, machine operators, mechanics, nurse’s aides, waitresses, small retail store managers, bus drivers, taxi drivers, truck drivers, and all the jobs that they wouldn’t dare do themselves, being so much smarter than the rest of us (doubtful they know which end of a wrench to use).

Being a “working class white voter” does not make us inferior or intellectually stunted so much that we need to be (re)educated in liberally biased schools of doublespeak and thoughtlessness. All we want to do is work a good job that does present a modest challenge, that does feel rewarding, keeps the lights on and our bellies full and after all of that, we just want to come home, drink some beers, pet the dog and enjoy the sunset in our small suburban slice of heaven. For us, that is what life is all about. We don’t care about revolutions, microaggressions, or how many physical and economic descriptors we can apply to a sub group of a sub group of a sub group. People like Gest and Capehart are more important to themselves, like Narcissus was to his reflection; eventually, they will drown in their obsession. And when they do, they’re still gonna be at the counter of a Mom and Pop shop asking some “white working class voter” with grease on his or her face “What’s wrong with my Prius?”