Michael Hudson on Reforming the US Financial and Tax System

29 Nov

In order to create lasting change in the financial world of banking as we know it today, we must become educated enough to understand the system as it currently operates and to identify the pitfalls of the power elite ‘solutions’ offered up in order to consolidate their controlling interests. We present this piece by Michael Hudson not as the ‘only answer’ but as a part of what is needed to be understood in order for us all to be wise enough to make coherent and useful choices in the months and years ahead as we contront the banker-occupied world which has now strategically indebted us all in its service.

As the OWS movement expands, is sidelined, and regains its footing on literally thousands of fronts across the world, the increasing demand by main stream media and other political power brokers for a ‘concrete list of demands’ as well as accusations of a lack of focus or understanding continue to be heard as well.  In this excellent and encompassing piece, Dr. Michael Hudson is interviewed by Alan Minsky of KPFK and addresses not only the importance of this time of coming to understand the actual and long standing underlying problems of the current financial system but also the fundamental issues which must be acknowledged, understood and addressed in order to achieve true change for the 99% and the vast majority of hmans all over the globe.

As Hudson points out, the rush to privatization following the British model under Thatcher and Blair is yet another cannibalization of the public infrastructure at the expense of the common use in terturn for quick cash and financial fiefdom which could ultimately leave the world’s population as the renters in all daily undertakings from roads to bridges to any form of access to what is now and was designed to be the public commons.

The question is not simply one of what constitutes free markets but also at what point do we address the long standing corruption and wholesale looting of nation states by private interests, banking and the controlling elite?  Without addressing the true state of affairs in our international and national financial and public sector systems as they satnd today we cannot possibly create the level of change necessary to reform the system towards what would be equitable and egalitarian for all peoples, rather than the controlling few.

Here is a short section of the piece. Follow the headline link or the link at the bottom of the excerpt to read the entire transcript at Michael Hudsn’t blog.

Reforming the U.S. Financial and Tax System

November 20, 2011


On November 3, 2011, Alan Minsky interviewed me on KPFK’s program, “Building a Powerful Movement in the United States” in preparation for an Occupy L.A. teach-in. Listen to the interview.

To clarify my points I have edited and expanded my answers from the interview transcript.

Alan Minsky: I am joined now by Michael Hudson. He is a distinguished research professor of economics at the University of Missouri-Kansas City, and also is president of the Institute for the Study of Long Term Economic Trends. Welcome to the show, Michael.

Michael Hudson: Thank you very much.

Alan Minsky: Michael Hudson is scheduled to address Occupy L.A. as part of a teach-in that includes William Black and Robert Scheer, who will be moderating the panel that Michael will be on this weekend. Michael, I’m familiar with your work and I know that you are a big-picture economic thinker. This is definitely a movement that is asking the big questions about how the global economy and the national economy should be re-organized. What would you say to the movement at large about how best to organize a high-tech modern industrial economy in a way that would produce more social and economic justice?

America is being radicalized by coming to realize how radical Wall Street’s power grab is
Michael Hudson: The Occupy Wall Street movement has many similarities with what used to be called the Great Awakening periods in America. Such periods always begin by realizing how serious the problem is. So diagnosis is the most important tactic. Diagnosing the problem mobilizes power for a solution. Otherwise, solutions will seem to come out of thin air and people won’t understand why they are needed, or even the problems that solutions are intended to cure.

The basic problem today is that nearly everyone is in debt. This is the problem in Europe too. There are Occupy Berlin meetings, the Greek and Icelandic protest, Spain’s “Indignant” demonstrations and similar ones throughout the world.

When debts reach today’s proportions, a basic economic principle is at work: Debts that can’t be paid; won’t be. The question is, just how are they not going to be paid? People with student loans are not permitted to declare bankruptcy to get a fresh start. The government or collection agencies dock their salaries and go after whatever property they have. Many people’s revenue over and above basic needs is earmarked to pay the bankers. Typical American wage earners pay about 40 percent of their wages on housing whose price is bid up by easy mortgage credit, and another 10 to 15 percent for credit cards and other debt service. FICA takes over 13 percent, and federal, local and sales taxes another 15 percent or so. All this leaves only about a quarter of many peoples’ paychecks available for spending on goods and services. This is what is causing today’s debt deflation. And Wall Street is supporting it, because it extracts income from the bottom 99% to pay the top 1%.

Half a century ago most economists imagined that the problem would be people saving too much as they got richer. Saving meant non-spending. But the problem has turned out to be just the opposite: debt. Overall salaries have not risen in decades, so many people have borrowed just to break even. Instead of an era of free choice, very little of their income is available for discretionary spending. It is earmarked to pay the financial, insurance and real estate sectors, not the “real” production and consumption economy. And now repayment time has arrived. People are squeezed. So when America’s saving rate recently rose from zero to 3 percent of national income, it takes the form of people paying down the debts

Many people thought that the way to get rich faster was to borrow money to buy homes and stocks they expected to rise in price. But this has left the economy financially strapped. People are feeling depressed. The tendency is to blame themselves. I think that the Occupy Wall Street movement, at least here in New York, is like what has occurred in Greece and also in the Arab Spring. People are coming together, and at first they may simply watch what’s going on. Onlookers may come by to see what it’s all about. But then they think, “Wait a minute! Other people are having the same problem I’m having. Maybe it is not really my fault.”

So they begin to see that all these other people who have a similar problem in not being able to pay their debts, they realize that they have been financially crippled by the banks. It is not that they have done something wrong or are sore losers, as Herman Cain says. Something radically wrong with the system.


Read the Rest of the Transcript at Micheal Hudson’s Blog


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