debt

Here are three by financial economist and historian Michael Hudson to help guide you through the economic meltdown currently underway. Best taken with a stiff drink.

1. “The new road to serfdom: An illustrated guide to the coming real estate collapse.” Harper’s Magazine, May 2006.

2.  Michael Hudson and Nomi Prins on the AIG bailout. Democracy Now, Sept. 17, 2008.

The bailout is “the worst possible move, and it puts the class war back in business with a vengeance. Wall Street has been preparing for this for years, because every financial analyst knows that the debts can’t be paid. And the question that Wall Street has, if you’re going to take a gamble on bad debts that can’t be paid, how are you going to come out a winner? And there’s only one way of coming out a winner, and that’s to make the government bail you out.”

3.”The insanity of the $700 billion give-away.” CounterPunch, Sept. 29, 2008.

“No economy can keep up with the burden of debts growing at exponential rates faster than the economy itself is growing. No economy can grow at steady exponential rates; only debts can multiply in this way. That is why Mr. Paulson’s $700 billion giveaway to his Wall Street colleagues cannot work.

“What it can do is provide a one-time transfer of wealth to insiders who already have been playing the debt-credit system and siphoning off its predatory financial proceeds to themselves.”

The gist: today’s failed bail-out bill was a really, really bad idea that wouldn’t have worked anyway. The biggest danger now? That they’ll come up with something even worse.

The only workable solution is to write-down or forgive the bad debts and let the banks and investors eat it. That’s the only way “Main Street” is going to recover. But don’t hold your breath for Paulson to propose that.

Two takes on the state of the union to our south:

1. The Extreme Reality Makeover Show

Symbolic to our era like a sledgehammer to drywall, the biggest house that ABC’s “Extreme Makeover: Home Edition” ever made over — a sprawling, four-bedroom starter castle, a three-car garage mahal with a turret and all — has gone into foreclosure, in the ‘burbs south of Atlanta.

2. It’s a Class War, Stupid
Election season will be packed with distractions, but the real issue is becoming a matter of life and death

By Matt Taibbi
Rolling Stone
Jul 15, 2008

I am a single mother with a 9-year-old boy. To stay warm at night my son and I would pull off all the pillows from the couch and pile them on the kitchen floor. I’d hang a blanket from the kitchen doorway and we’d sleep right there on the floor. By February we ran out of wood and I burned my mother’s dining room furniture. I have no oil for hot water. We boil our water on the stove and pour it in the tub. I’d like to order one of your flags and hang it upside down at the capital building… we are certainly a country in distress.

— Letter from a single mother in a Vermont city, to Senator Bernie Sanders

The slice-of-life radio documentary show This American Life has just put out a show on the U.S. housing/credit crisis. TIL does an excellent job of teasing out the complex causes and devastating consequences of the subprime disaster.

With Canadians’ debt levels at record highs and the U.S. economy in the midst of a massive housing/credit deflation, Briarpatch takes a sorely needed critical, radical look at the politics of money and debt in this issue. From exposing the spectre of diabolical materialism to offering “concrete” investment strategies and tools for getting out of debt, from profiling alternative currencies to outlining the options for conscientious objection to military taxation, Briarpatch puts its money where its mouth is.

To subscribe or order a copy of this issue, call 1-866-431-5777 or visit our secure online shop. Read the rest of this entry »

By Nick Dearden
Counterpunch.org

In recent weeks, Haiti has been gripped by violent protest yet again. And yet again the inhabitants of this impoverished country are suffering the most brutal consequences of the fallout of the global economic crisis. This time it is the rise in global food prices, which has sparked riots in Port au Prince, Haiti’s capital, where UN peacekeepers used rubber bullets and tear gas against protesters attempting to storm the presidential palace. Days later the prime minister was fired.

It is therefore particularly appropriate that on Tuesday this week -the anniversary of the death of Haiti’s dictator, Francois “Papa Doc” Duvalier - hundreds of debt campaigners fasted for Haiti’s debt to be cancelled. Haiti’s fate has been tied up with the issue of international debt more than any other country. Despite the fact that its debt is illegitimate by any standards and despite Haiti’s sorry position as the poorest country in the western hemisphere, it still owes $1.3bn. Every year debt repayments flow from Haiti to multilateral banks, just as its resources once enriched the French empire.

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Stretched buyers fuel boom in housing: Engine behind the country’s housing boom has been increasingly leveraged first-time buyers

By Tavia Grant
Globe and Mail
April 23, 2008

Canada may not have the sizable subprime market of the U.S., but the engine behind the country’s housing boom has been increasingly leveraged first-time buyers.

Legions of first-timers are adding years of extra mortgage payments so they can buy a house, or putting little or no money into a down payment, a Re/Max survey revealed yesterday. Nearly two-thirds of buyers in major centres now favour extended amortization periods of up to 40 years, while putting little or no money down was prevalent in 38 per cent of regional markets surveyed across Canada.

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“Buy this car to drive to work
drive to work to pay for this car.”
Metric

When the world is combusting all around us, it seems a little petty to devote an entire issue of Briarpatch to questions of debt and personal finance. But in many ways, the subject couldn’t be more pressing or more in need of radical intervention. Canadians’ debt levels have never been higher, and widespread indebtedness, in addition to serving as an effective vehicle for transferring more wealth to the wealthy, also acts as a powerful means of social control. Debt restricts people’s choices, compelling them to work longer hours at jobs they hate, and limits their ability to unplug from the engine of growth and to seek out alternate ways of sustaining themselves and their communities.

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By Calvin Neufeld
Briarpatch Magazine
May 2008

The plan: save money, buy land, build a house, grow food, heat with wood, quit jobs, and self-sustain­ — all without going into debt.

Although I was raised in the suburbs of Montreal, my life today resembles that of my Mennonite ancestors. In the winter I bathe in a tub of snow (melted and heated first, of course). I live in a one-room house without electricity or plumbing. I do my business in an outhouse, or sometimes, to my wife’s displeasure, in the great outdoors. I cut and chop all of my own firewood, and gather twigs almost daily for kindling. It’s hard work, but it pays off. The earth isn’t the only beneficiary of this lifestyle, either; this is my ticket to financial independence.

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By Geordie Gwalgen Dent
Briarpatch Magazine
May 2008

Ah, springtime, 1930. U.S. stock markets had slightly recovered from the “Black Tuesday” crash of the year before. Credit was cheap and the Western world was spending freely. Though people had been spooked, optimism reigned again. Few people knew that the entire global economy was on the edge of a precipice and about to begin a slow, brutal, downward spiral that would usher in almost a decade of misery for countless Canadians and others around the world.

If you’ve been following the recent financial news about the “subprime crisis” closely, some of this might sound eerily familiar. This financial fiasco involving thousands of mortgage defaults in the U.S. was considered by many to be a minor bump in the road when it made headlines last August. And now? The U.S. is in recession and there is speculation it will spread to other countries.

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By Dave Oswald Mitchell
Briarpatch Magazine
May 2008

“The rich ruleth over the poor,
and the borrower is slave to the lender.”

Proverbs 22:7

Reasons to get out:

1. We are a nation of debt slaves

“Debt throughout most of history has been little more than a slight variation on slavery,” wrote Michael Hudson in his prescient May 2006 article in Harper’s (”The New Road to Serfdom: An illustrated guide to the coming real estate collapse”). Today, however, perceptions have changed to such a degree that a mortgage is now seen as an “investment,” and levels of personal indebtedness for both Canadians and Americans have never been higher.

The Vanier Institute of the Family recently reported that Canadians’ household debt rose seven times faster than income between 1990 and 2007. This debt now represents a record 131 per cent of average household income, meaning that for every $100 of net income earned in Canada last year, $131 was owed.

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