The topics that most interested me – and the focus of this book – were not taught at New York University where I took my graduate economics degrees. In fact, they are not taught in any
university departments: the dynamics of debt, and how the pattern of bank lending inflates land prices, or national income accounting and the rising share absorbed by rent extraction in the Finance, Insurance and Real Estate (FIRE) sector. There was only one way to learn how to analyze these topics: to work for banks. Back in the 1960s there was barely a hint that these trends would become a great financial bubble. But the dynamics were there, and I was fortunate enough to be hired to chart them.
evilgenius wrote:What Keen is really addressing in the video is not how debt, especially private debt is so wrong, but how private debt used as a substitute for wages is wrong. There is a difference between debt used as a substitute for wages and debt used as a lever in order to gain return. The wise use of debt would look at debt as a means to achieve gain, when you can't afford to exercise an opportunity because your wages are too low, as a good thing. Since a house is not really an investment, the wise use of debt would not look upon borrowing too much to get one as a wise use of debt. It especially would not look upon the expansion of that debt in order to buy a big screen TV or an RV as a wise investment. Now, if you could borrow in order to set up a situation where you could start a business or something which would actually bring in a greater return than the interest rate you paid to get into the business, that would be different.
Pops wrote:Great post, Evil.
Tie this back to Piketty pointing out that while wealth for centuries was held in productive capital—farmland, nowadays most wealth is held in housing.
pstarr wrote:That's not true. Some of those $100 million homes have lots of bathrooms and fantastic views. You can see the hoi ploi down on the beach. Or sometimes (if you strain really hard) you can see a mountain peak through the smog. And they are filled with $100 million Picasso doodles.
If that is not productive I don't know what is.
kanon wrote:I think Keen is in favor of QE for the public. His idea is to give a sum to everyone where anyone with debt must use the sum to pay their debts. Biological persons without debt would receive somewhat of a windfall. The banks would receive the payments but, I imagine Keen would include less prospects for future lending.
This is not confiscating the loot of the wealthy, but I can certainly understand Cog's consternation. After all, there is no real justification for government intervention to benefit ordinary people. Otherwise, what is the point of being wealthy and powerful? Depression crisis -- no such thing -- the only true crisis is if the banking cartel does not have the government at its near exclusive beck and call.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
Tanada wrote:kanon wrote:I think Keen is in favor of QE for the public. His idea is to give a sum to everyone where anyone with debt must use the sum to pay their debts. Biological persons without debt would receive somewhat of a windfall. The banks would receive the payments but, I imagine Keen would include less prospects for future lending.
This is not confiscating the loot of the wealthy, but I can certainly understand Cog's consternation. After all, there is no real justification for government intervention to benefit ordinary people. Otherwise, what is the point of being wealthy and powerful? Depression crisis -- no such thing -- the only true crisis is if the banking cartel does not have the government at its near exclusive beck and call.
If I wanted to search back about 5,000 posts ago this is exactly the plan I was hoping for. Pay off the bank debts by routing the money through the average persons accounts in 2009 instead of just giving it straight to the 'too big to fail' banks and the economy would have recovered quite quickly while still protecting the banks. The real foundation of the USA economy is small level consumer spending, dumping money in the giant banks accounts directly did zero to fix the problems caused when the housing bubble popped. I wanted to sell my house for years because of my financial situation but property values were so low I couldn't even refinance it. It was pure luck that prices recovered just enough that at the time of foreclosure I broke even between remaining debt and then current sale price, but I lost my entire life savings and all the money I had invested in the house and I got seven years bad credit reports.
All those same things happened to tens of millions of other average people, and all of it would have been avoided if the bail out money had gone to pay down my house debt to equal the value in the post bubble market. I could have then refinanced my house and I would still own it, or be able to sell it today without losing my life savings or destroying my excellent credit rating.
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