J Is For JUNK Economics
J Is For JUNK Economics
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disruption caused by errors or omissions, whether such result from negligence, accident or any other case.
Set in Times New Roman and Baskerville boldface.
Design and typesetting by Edit/Design Productions.
Charts and tables by Cornelia Wunsch and Lynn Yost.
“The Miracle of Compound Interest” illustration courtesy Nigel Holmes.
Rosetta Stone (British Museum) © AdobeStock.
Hudson, Michael, 1939-J is for Junk Economics: A Guide to Reality in an Age of Deception (eBook)
Michael Hudson ISBN: 978-3-9818260-0-5
Companion to KILLING THE HOST by Michael Hudson.
TABLE OF CONTENTS
FOREWORD: Economies – and Economic Theory – at the Crossroads
PREFACE
ACKNOWLEDGEMENTS
INTRODUCTION: Social Naming Disorder and the Vocabulary of Deception
A-to-Z VOCABULARY GUIDE
LIST OF ILLUSTRATIONS
ESSAYS AND ARTICLES:
The 2008 banking and junk mortgage crisis saw the United States and Europe
save banks and bondholders, not their economies. While governments spent
trillions on bailouts and “quantitative easing” to save large creditors and
speculators from losses on their bad loans and gambles, public and private
infrastructure has been left to crumble and median wages are drifting down.
Pension savings are being stripped, and pressure is rising to cut back Social
Security.
Junk Economics is the cover story for all this. Claiming to be scientific, it is
sponsored by financial interests to redistribute income and wealth upward,
reversing the policies urged by the 19th-century classical economists and
Progressive Era reformers. Instead of progressive taxation, this ideology
advocates shifting taxes off the One Percent onto the 99 Percent.
The effect is to suck money out of economies, while driving the middle class
into debt, mainly to the One Percent. The resulting austerity is used as an excuse
to privatize the public assets and natural resources that classical economists
hoped would provide the tax base for administering the proper functions of
government. Debt-strapped local and national governments are forced to sell off
public infrastructure to pay creditors.
The pretense is that this will lower the cost of these basic services. But
public infrastructure is being turned into opportunities for new owners to charge
monopoly fees for themselves, resulting in a loss of affordable basic services. In
the United States, compulsory privatized Obamacare is squeezing family
budgets, while in Britain privatized railroads and water are among the most
blatant examples.
Instead of leading to the promised leisure economy of abundance by freeing
society from the legacies of feudalism and the hereditary privileges of
aristocracies, bankers and monopolists, today’s financial elites promote Junk
Economics to increase their time-honored “free lunch” at society’s expense. The
debt overhead they create for the economy at large was well identified a century
ago as avoidable. But today’s financial class has idealized running into debt as
the way for economies to get rich by inflating asset prices. Wages, profits and
rents are being turned into a flow of interest payments that are growing
exponentially. Meanwhile, national statistics divert attention away from how
debt service is siphoning household and business income up to the top of the
economic pyramid.
The suffering caused by the resulting financial austerity is unnecessary, not a
result of any natural law. This reversal of the classical ideal of a “free market” –
a market free from land rent, monopoly rent and predatory finance – has been
promoted with a new vocabulary of Orwellian Doublespeak. For example, the
term “reform,” as used today, means reversing the Progressive Era reforms that
helped create a prosperous American and European middle class. It has been
forgotten that what made the 20th century great was progressive taxation and
public infrastructure spending to lower the cost of basic economic services –
along with the New Deal and other legislation making money and finance a
public utility instead of the predatory monopoly it has become.
To revive a more reality-based analysis and policy-making, this book aims to
reconstruct economics as a discipline, starting with its vocabulary and basic
concepts.
PREFACE
I drafted this dictionary and its accompanying essays more than a decade ago,
for a book to have been entitled The Fictitious Economy. It did not find a
publisher. My warnings about how debt leveraging would lead to a crisis hardly
qualified as a timely how-to-get-rich manual of the sort that publishers consider
to be popular “economics books.” Most readers were making easy money in the
stock market and real estate. As stock prices recovered from their dot.com crash
of 2000, home owners and investors were getting rich by debt leveraging, while
pension funds remained solvent without having to increase employer or
employee contributions.
Nobody wanted to hear that the gains couldn’t be permanent while so much
was there to be taken. Most of all, people did not want to hear that the financial
sector that they thought was making them rich actually was undermining the
economy and paving the road to the debt deflation that has made the economy
poorer since the 2008 crash. Poorer, that is, for the 99 Percent whose incomes
are now being paid to the One Percent as debt service and economic rent.
Flooding the stock market with debt-leveraged liquidity provided a
propitious opportunity for President Bush and the Republicans to privatize
Social Security. Their dream was to steer the monthly flow of wage withholding
into the stock market, inflating a stock market boom along the same lines that
Pension Fund Capitalism had been fueling since the 1950s. The aim was to
generate soaring prices for speculators and a tidal wave of fees for Wall Street’s
money managers.
I met the editor of Harper’s, Lewis Lapham, at a meeting of the Thorstein
Veblen Society in 2004, and we discussed the need to warn against the idea that
money could be made purely by financial engineering without building up the
“real” economy. My cover story in 20051 on the proposed Social Security
swindle reminded readers that stocks could fall as well as rise. The market’s
downturn that year dampened enthusiasm for privatization of Social Security,
and a rising wave of scandals showed that Wall Street’s money managers were
more concerned with making fortunes for themselves than with helping
customers.
The FBI warned in September of 2004 that the greatest wave of financial
fraud since the 1920s was underway, but its fraud staff was cut back and
assigned to anti-terrorist duties in the wake of 9/11.2 Banks lent money on
increasingly reckless terms, selling the loans to customers who believed that the
creation of sophisticated options trading meant that risk no longer existed. The
reality was that risk was transferred to the proverbial suckers who lacked
sufficient training in mathematical statistics to realize that someone would have
to bear the loss from loans that could not be paid.
The gains that were envisioned had been called “fictitious” or “fictive”
capital in the late 19th century. From Karl Marx on the left of the political
spectrum to Henry George on the right, these terms were commonplace to
describe stock market and allied financial manipulations. A century of classical
economists defined economic rent as an extractive means of gaining wealth. But
economic models no longer draw the distinction that a century of classical
economists had emphasized between productive and unproductive labor and
investment. Financial gain-seeking is deemed as productive as building factories
and investing in public infrastructure.
Along with changing analytic concepts has come a change in the language of
economics. Today’s writers use jargon terms such as “zero-sum activity” and
“transfer payments” to distinguish rent seeking from real wealth based on
producing tangible consumer goods and capital goods.
This change reflects the fact that economies now aim at different objectives
from those of the classical economic critics and reformers. Instead of allying
itself with industry, banking has found its major market in real estate, the rent-
yielding oil and mining sectors, and monopolies. I wrote another cover story for
Harper’s in 2006 on the mortgage bubble, warning that the financial sector was
making most people so much more indebted that a real estate crash was about to
occur, leaving a debt overhang in place that would deplete the economy.3
It was at this point that I again tried to publish The Fictitious Economy to
show how debts tend to grow more rapidly than the underlying economy. My
aim was to revive the classical distinction between market prices and intrinsic
value, to show how different making fortunes in the Finance, Insurance and Real
Estate (FIRE) sector was from the “real” economy of production and
consumption. But following the guideline that readers do not want to hear “bad”
economic news until after the break occurs, publishers told me that they
preferred a how-to-do-it book to profiteer from the coming financial collapse, if
and when it occurred. Readers wanted to know how to get rich, not how their
bubble gains would leave them and the overall economy debt-wracked.
Many investors saw that the bubble could not go on forever. Their main
concern was indeed to calculate how they could make money off the coming
collapse. John Paulson bet that junk mortgages would default, and got Goldman
Sachs to package and sell them to gullible clients, who lost their shirts while he
and Goldman made a billion dollars. But this was not the kind of investment
opportunity that I wanted to promote.
An otherwise favorable academic publisher proved unable to get my book
through the peer review process when one of the referees, who claimed to have
taught Adam Smith’s economic thought for years, wrote that he could find no
evidence of any intent to bring market prices in line with the cost of production
(real value). If that reviewer’s claim were true, it would mean Smith was not
really interested in freeing economies from land rent and monopoly rent.
I found this ignorance shocking. More than a century of classical economic
thought aimed precisely to distinguish between market price and the necessary
costs of production, so as to isolate land rent and monopoly rent as unearned
income paid to an unnecessary rentier class. This was the essence of the
economic and political reforms advocated from 18th-century France, Scotland
and England through the Progressive Era. The focus of classical economics was
to free society from rent seeking and exploitative prices being charged, not to
celebrate these as investment opportunities. But that body of analysis and
reform-minded thought has been airbrushed from the academic curriculum. The
history of economic thought rarely is taught anymore. The prospective publisher
wrote me: “I suspect that the sort of book you want to write is just not one that
will get through the screening process that all academic presses have to carry
out. I’m sorry about this, as I think that your original idea (how neoliberals have
betrayed Enlightenment ideals) is a brilliant one.”
My analysis of the relation between tax policy, money and credit creation
prompted another university press reviewer to call my book proposal “populist
in the monetary heterodox (‘crank’) tradition. It also endorses the Henry George
Single Tax tradition.” The writer evidently wanted to take an easy shot at the
Henry George cult, which lacks the value and price theory on which Adam
Smith, John Stuart Mill and dozens of other classical economists based their
advocacy of taxing economic rent. It’s easier to attack a popular journalist like
George than to cope with the rent and value theory of Smith, Mill, Alfred
Marshall, Simon Patten, Thorsten Veblen et al.
As for Modern Monetary Theory (MMT), developed primarily by my
colleagues at the University of Missouri, Kansas City (UMKC), it is now
becoming accepted as the alternative to neoliberal austerity. Yet so strong is the
ideological demand for balanced budgets – and actually a surplus (as the Clinton
administration ran at the end of the 1990s) – that those of us who developed an
alternative analysis were called “cranks” just a few years ago. But as the saying
goes, “cranks turn wheels, and wheels make revolutions.”
Our monetary and fiscal alternative rejects the balanced-budget “deficit
hawk” policy that is deflating the U.S. and European economies with fiscal drag.
Running a budget surplus means raising taxes and/or cutting public spending,
taking money out of the economy to pay off bondholders. Paying down the
public debt sucks money out of the economy, just as paying debt service to
banks causes debt deflation. We argue that just as commercial banks create
money (deposits) electronically simply by making loans, governments can do the
same thing. Government budget deficits spend money into the economy – and
this is not inflationary when labor and resources are unemployed.
That is why UMKC Economics Department chairperson Stephanie Kelton
calls us “deficit owls,” to contrast us with the “deficit hawks” currently holding
sway. By explaining the linkage between fiscal and monetary policy, Modern
Monetary Theory provides an alternative to today’s neoliberal Junk Economics,
which rationalizes austerity, to be followed by bank bailouts when their
disastrous policies inflate financial bubbles that benefit their constituency of
bankers and bondholders. MMT views money and credit as a public utility, not
as a private monopoly of commercial banks. MMT accordingly urges central
banks or treasuries to monetize budget deficits by creating money to spend into
the economy. The government’s budget deficit is (by definition) the private
sector’s surplus. (See the MMT entry in the A-to-Z Guide in this book for more
discussion.) So the alternative to junk economics turns out to be MMT “crank”
economics.
These five articles show the extent to which economics is taught as a pseudo-
science of assumptions without regard for reality or history. We are living in a
world in which the rentier censorial motto has achieved dominance: “If the eye
offends thee, pluck it out.”
ACKNOWLEDGEMENTS
As a first step toward the needed reconstruction of economics and rescue of its
vocabulary, I owe by far my greatest debt to the forgotten – indeed, expurgated –
classical economists, from François Quesnay and Adam Smith to E. Peshine
Smith, John Stuart Mill and Karl Marx to Michael Flürscheim, Simon Patten and
Thorstein Veblen. While each had his own political aim, they shared an
abhorrence of unearned income and parasitic wealth. Their analytic tools and
worldview have been consigned to an Orwellian memory hole by lobbyists for
the predatory interests who have taken control of economic thought and
government policy.
I also owe a debt to the living. Without the loving support of my wife, Grace,
this book would not have been completed. Susan Charette, David Kelley, Bertell
Ollman and most of all my editor Lynn Yost have made suggestions that have
greatly enhanced the substance of this book. Four proofreaders in Australia and
the U.S. volunteered to copy edit the original version in 2015: Amy Castor,
Brent Grisim, Ben Hughes and Richard Mallard. Also thanks to Dave Yost, Karl
Fitzgerald and to Steven Lesh for their final reading and comments. Their
changes and corrections showed me that writers should never try to be their own
proofreaders.
INTRODUCTION:
Social Naming Disorder and the Vocabulary
of Deception
… the decline of a language must ultimately have political and economic causes … It becomes ugly
and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier
for us to have foolish thoughts. The point is that the process is reversible. … If one gets rid of these
habits one can think more clearly, and to think clearly is a necessary first step toward political
regeneration.
— George Orwell, “Politics and the English Language” (1946)
You can fool some of the people all of the time. Those are the ones you should concentrate on.
— George W. Bush (2001)
Confucius taught that social disorder begins with the failure to call things by
their appropriate names. The first step to reforming a malstructured world
therefore is “rectification of the names.” To Confucius this meant restoring the
original meaning of words.
Today’s economic terminology is in obvious need of such renovation.
Rejecting the classical economics of Adam Smith, John Stuart Mill and their
contemporary critics of landlords and monopolists, defenders of unearned
income have blurred and obscured economic terminology into euphemisms to
deny that there is any such thing as a free lunch. The terms rentier and usury that
played so central a role in past centuries now sound anachronistic and have been
replaced with more positive Orwellian Doublethink.
As advertisers know, naming a product shapes how people perceive it. A vast
public relations operation has been engineered to invert the meaning of words to
make black appear white. Nowhere is this tactic more political than in the
promotion of economic ideology. Today’s vocabulary of wealth and the lapse
into a rent-and-usury economy is euphemized as progress toward a leisure
society, not debt serfdom. Financial bubbles that inflate prices for buying a home
or a specific retirement income plan are called “wealth creation,” not debt-
leveraged asset-price inflation, while downsizing and breaking up industrial
companies is called “value creation,” not looting.
Accounting: Like markets, accounting began in the public sector. The root of
the term “statistics” is “state,” originally referring to data describing the
condition of the national economy. Accounting always has been a tool of
economic control, and this means hierarchical authority. Someone is reporting to
a superior – an overseer, planner or tax collector. (See Balance Sheet and
Economic Forecasting.) First attested in Sumer’s temples c. 4000 BC to keep
track of food and other raw materials in workshops and other enterprises,
account keeping requires a common standard of value. By the third millennium
BC accounting was used to standardize the flow of resources with an eye to
cutting costs and squeezing out an economic surplus in Mesopotamian temples
and palaces. Because temple (and later, palace) taxes, fees and returns were paid
in the form of grain or imported silver, these commodities became the
prototypical money. (See State Theory of Money.)1
Today, accounting has been used increasingly for tax avoidance and to
misrepresent the state of the economy. The Federal Reserve publishes
notoriously misleading statistics understating the value of land relative to that of
buildings (to avoid showing real estate’s “free lunch” land-price gains), while
the National Income and Product Accounts (NIPA) depict FIRE sector revenue
as reflecting real output instead of overhead. (See Junk Economics.) Corporate
accountants use “over-depreciation” and other tax loopholes that make FIRE
sector income virtually tax-exempt, while “Hollywood” accounting shows no
profits owed to outside investors. At the other extreme, Enron’s accounting fraud
was based “mark-to-model” practices like those that facilitated the WorldCom
fraud. This led to the demise of the Arthur Andersen accounting firm, and it
turned out that the other major U.S. accounting firms were indulging in much the
same practice. Deregulation of public oversight has led to accounting fictions
based on overstated cash flows that reached their apogee in the Ponzi Scheme
perpetrated by Bernie Madoff.
Apex Predator: The predator at the top of a food chain, e.g., killer whales in the
ocean or lions in the jungle. In the economic jungle, banks and bondholders
stand at the top, followed by real estate moguls, the oil and mining sectors, and
infrastructure monopolists in telecommunications and information technology.
Along with chemical, pharmaceutical and health care monopolies, these rent-
seeking sectors make money by establishing choke points enabling them to
appropriate the income and wealth created by labor and industry. (See Parasite
and Rentier.) Alienation: The result of an exploitative relationship in which
labor is not in control of the products it creates or the working conditions of how
its products are made. Such relationships have existed since the Bronze Age, in
modes of production where labor is dependent and its product is appropriated by
an employer, slave-owner, feudal lord, absentee landlord or creditor. The
common denominator in such alienation is the loss or deprivation of personal
control (see Choice) over one’s life, working conditions, affordability of
ownership of one’s domicile, and ultimately the loss of one’s status in society.
From the Bronze Age through classical antiquity, getting someone into debt
was the main lever forcing such alienation. Debtors pledged themselves – or
their slaves, wives or children – in bondage to creditors. That was one of the
most ancient means of obtaining dependent labor.
As a legal term, alienation means the transfer of property. Pledging one’s
subsistence land rights meant losing the family’s means of self-support, by
forfeiture or forced sale. This meant loss of economic freedom and ultimately,
citizenship rights. With the rise of industrial capitalism the main object of sale
became one’s labor power to employers for wages. Such labor was nominally
free in the sense of being able to decide just whom to work for. But it no longer
was free to support itself on its own land.
Karl Marx discussed alienation in his 1844 manuscripts and unpublished
Grundrisse notes before writing Capital (where the term does not appear,
although the basic concept is there.) His focus was on how wage labor is not in
control of its own life. The wage relationship between capitalist and employee
separates workers from control over their products and how these are produced.
By thwarting what Thorstein Veblen called the Instinct of Workmanship – in
which labor is able to express its personality and creativity as part of the
production process – the drudgery of industrial labor and exhausting working
hours leads to emotional alienation. Employers are in charge of what labor
produces, under conditions of dependency in an economic process that is often
impersonal.
Capitalists themselves are drawn into this impersonal dynamic as production
increasingly is financialized in a dynamic focused on making money as an end in
itself. (See Greed and Affluenza.) Alienation tends to become so ingrained that
employers as well as labor are unable to recognize its dynamics. On the broadest
social scale, nature’s ecological balance is violated by the drive for profits and to
carry an exponentially expanding debt load.
“As If” Argument: The simplest way to distract attention from how economies
are unfair is to treat economic theory as a purely abstract logical exercise. (See
GIGO.) A parallel universe is presented as a set of assumptions. As in novels,
the key is to get observers to suspend disbelief. Mainstream economics, for
instance, reasons as if all wealthy individuals earn their income by playing a
productive role and put their savings in banks or the bond market – which are
assumed to increase prosperity by lending these savings to entrepreneurs to build
factories and employ labor. Rentier income, junk mortgage lending and
corporate takeover loans play no role in this “as if” picture. Defining the
economy’s problems narrowly in this hypothetical way facilitates a tunnel vision
that Thorstein Veblen called “trained incapacity” – an inability to understand
how economies actually work or how financialization leads to systemic
problems. (See Learned Ignorance.) Asset-Price Inflation: Despite the fact
that most money and bank credit is spent on assets, not on goods and services,
the Quantity Theory of Money, MV=PT, relates money creation only to
commodity prices, not asset prices. The reality is that banks don’t lend for new
direct capital investment, and only a small proportion is lent for consumer goods.
Banks lend mainly against assets in place – real estate (about 80% of
commercial bank loans), bonds and stocks. This credit for buyers of real estate,
stocks and bonds inflates debt-leveraged windfall gains (euphemized as capital
gains; see Wealth Creation).
Assets are worth as much as banks will lend new buyers. Housing prices, for
instance, are inflated by steering mortgage credit into real estate, lowering
interest rates so that higher mortgage debts can be carried. Also, loosening the
terms of mortgage lending reduces the down payments needed.
A related financial phenomenon contributing to asset-price inflation is the
corporate practice of borrowing more while using earnings for stock buybacks
and higher dividend payouts to raise short-term stock prices. Fiscal policy
contributes by shifting taxes off of financial and real estate income and capital
gains onto labor. (See Bubble, Great Moderation and Tax Shift.) The working
assumption is that higher asset prices increase net worth, as long as the rise in
market prices outpaces the growth of debt. But rising property prices increase
living costs by panicking homebuyers to buy now to avoid seeing the rise in
property prices outstrip wage gains. The economy polarizes as higher prices for
homes oblige families to go further into debt to obtain housing. When prices rise
as a result of greater debt leveraging, the resulting carrying charge (interest)
diverts income to the financial sector, away from being spent on goods and
services. The “real” economy slows, giving way to “Stage 2” of asset-price
inflation: debt deflation.
Asset Stripping: When corporate raiders take over companies, they cut back
research and development spending along with business lines that do not
produce short-term returns. They also downsize their labor force in order to
make the remaining employees work harder to pick up the slack and cut back
defined benefit pension plans. These practices are euphemized as wealth creation
when their effect is to improve reported earnings. This raises stock prices over
the short term, but undercuts long-term production and competitiveness.
Privatization is a program of stripping the public domain. Debt-strapped
countries are obliged to rely on neoliberal planning by the International
Monetary Fund (IMF) and World Bank. As a precondition for obtaining the
credit needed to service their foreign debts and avoid currency destabilization,
governments are obliged to sell off the “crown jewels” of their public domain –
mineral rights, public land, forests and buildings, and enterprises long held in the
public sector as natural monopolies such as communications, utilities and
transportation (see Commons, Conditionalities, Privatization and Washington
Consensus.) For further discussion see my book The Bubble And Beyond
(2013).
Austrian School of Economics: Emerged in Vienna toward the late 19th century
as a reaction against socialist reforms. Opposing public regulation and
ownership, the Austrian School created a parallel universe in which governments
did not appear except as a burden, not as playing a key role in industrial
development as historically has been the case, above all in Germany, the United
States and Japan.
Carl Menger developed an anachronistic fable that individuals developed
money as an outgrowth of barter, seeking a convenient store of value and means
of exchange. The reality is that money was developed by cost accountants in
Bronze Age Mesopotamian temples and palaces, mainly as a means of
denominating debts. (See my forthcoming book, The Lost Tradition of Biblical
Debt Cancellations.) Few transactions during the crop season were paid in
money, but took the form of personal debts mounting up to fall due on the
threshing floor when the harvest was in. Mercantile trade debts typically doubled
the advance of merchandise or money after five years.
Most of these advances were initially made by temple or palace handicraft
workshops, or collectors in the palace bureaucracy. Menger’s Austrian theory
ignored the fact that weights and measures were developed in the temples and
palaces, and that throughout antiquity silver and other metals were produced in
standardized purity by temple mints to avoid private-sector fraud. This history
has been expurgated, as if enterprise only occurs in the private sector, needing
no public role or regulation.
Also not appearing is the exploitation of labor by industrial capitalists.
Austrians developed the idea of “time preference.” Profits were attributed to the
fact that capital-intensive (“roundabout”) production took time, so profits were
simply a form of interest built into nature. (For the Austrian School’s Blame
The Victim theory of interest, debt and saving, see Impatience.)
B
is for
Bubble and the Bailout that follows
Bad Debt: Any debt that is defaulted on is called bad – at least for the creditor.
But many debts are the result of predatory lending practices. In such cases the
term “bad loan” is more appropriate. This is especially true of NINJA loans,
subprime home mortgage and auto loans, payday loans, and high-interest credit
card debt, as well as student loans and hospital loans in default.
As economies sink deeper into debt (usually by following policies demanded
by creditors), more debts cannot be paid – that is, paid without destroying the
debtor’s economic viability. In such cases what is bad are demands for payment
that strip debtors of their homes, or force entire economies into a downward
spiral. Exploitative loans beyond the reasonable ability of borrowers to pay
should be forgiven. What is good for such individuals (or national economies) is
not to pay such debts. It is the bad creditor or vulture bondholder who should
bear the moral opprobrium for acting against social norms of equity. The
response to a bad debt should be a good writeoff. (See Bankruptcy and Clean
Slate.) Bailout: A transfer of wealth to creditors, to save them from losing on
loans gone bad when the financial bubble burst in 2008. U.S. creditors
demanded public bailouts by Congress and the Federal Reserve (and in Europe
by the European Central Bank and IMF), as if they were victims rather than the
victimizers. Creditors were bailed out, and the bad debts left in place. (See Junk
Mortgage and NINJA Loans.) Somebody has to lose when banks make bad
loans or bondholders over-lend. Bailouts usually save creditors at public
expense. Reimbursing bankers, uninsured creditors and speculators to save them
from loss preserves economic control in the hands of the financial sector (see
Rentier, Oligarchy and Who/Whom). As Federal Deposit Insurance Corp. head
Sheila Bair explained regarding the 2008 bailout: “It’s all about the
bondholders.” Banks were saved from being nationalized or socialized to save
their bondholders and large uninsured depositors.
The aim of such bailouts is to enable the financial sector to pursue its
impossible dream that the miracle of compound interest can keep exponentially
increasing society’s debt burden without crashing the economy. In the United
States the Federal Reserve provided banks with more than $4 trillion of reserves
by pretending that the crash was only a temporary illiquidity problem. In Europe,
taxpayers were obliged to make up the loss, imposing deep depression on Ireland
and Greece.
Balance Sheet: More than just a bookkeeping concept, balance sheets are a way
of viewing the economy as a system, in which every asset has a corresponding
liability. Assets and liabilities always go together in an existential binary
relationship. One party’s saving is another’s debt. The basic balance is: Assets =
Liabilities + Net Worth Money, credit and debt would be more clearly
understood if teaching economics started by thinking about the economy in
terms of balance sheets. Bank checking and savings accounts are a liability by
banks to their depositors. But not all monetary debt is expected to be paid. Paper
money, for instance, is technically government debt, and appears on the
liabilities side of the public balance sheet. To pay it off would require retiring
the money in the private sector’s pocket. (See Modern Monetary Theory.)
Bank credit is created almost exclusively to purchase assets (real estate, stocks
and bonds). The effect is to increase debt/equity ratios for households and
industry. In the early stage of the business cycle, asset prices tend to rise faster
than the buildup of debt. But rising ratios of debt (liabilities) to net worth make
the economy more fragile (see Hyman Minsky and Ponzi Scheme), while
raising the break-even cost of living and doing business, because interest must
be paid. (See Compound Interest for the problems that ensue.) In time a crash
occurs, leading to negative equity (when debts exceed the market price of
assets). When that point is reached, governments must decide whether to bail out
the banks or save the economy by annulling the debts. (See Clean Slate.)
Balance Sheet Recession: A term coined by Nomura Holdings economist
Richard Koo to describe how Japan’s private sector became so debt-strapped
that it did not borrow even at zero interest rates after the bubble burst in 1990.
Families and businesses were obliged to pay down debt, leaving less to spend on
goods and services, deflating the “real” economy and causing a recession.
Property prices fell steadily, and the domestic market shrank as right-wing
governments raised taxes on consumer goods.
An alternative term to characterize the post-2008 downturn is debt
deflation. The plunge in real estate prices led the value of bank mortgages to
decline as default rates mounted. These mortgages were the main assets backing
bank liabilities to their depositors, bondholders and other counterparties. This
shortfall of assets behind liabilities prevented banks from extending new credit.
For homeowners, the decline in real estate prices wiped out most of their net
worth that had been built up by asset-price inflation leading up to 2008. Payback
time had arrived, and the economy stalled. It must continue to stall until the
volume of debt is brought back in line with the ability of income and assets to
cover what is owed.
Balanced Budget: Most people agree that individuals should avoid going into
debt – and indeed, should get out of debt by saving what they can. But
governments are different. They create money and spend it into the economy by
running budget deficits. When they do not run deficits, the economy is obliged
to rely on banks – which charge interest for providing credit. When President
Clinton ran a budget surplus in the late 1990s, this policy sucked revenue out of
the U.S. economy. (See Modern Monetary Theory.) Bankruptcy: Financial
legislation is a tug of war between creditors and debtors over whose rights
should come first. Creditors want to foreclose on as much of the debtor’s
property as possible. Debtors seek to make a fresh start with as much as they can
retain. In archaic and medieval law this included basic means of survival.
Gradually, debtors were permitted to keep their personal freedom (see Bond) as
bankruptcy law became increasingly humanitarian. But in 2005, U.S. banks and
credit card companies lobbied successfully to tighten the terms of bankruptcy,
increasing their claims on the future earnings of debtors.
For workers and homeowners, bankruptcy leads to forfeiture of property to
foreclosing banks or other creditors. Wage earners also lose when corporations
use bankruptcy (or the threat of bankruptcy) to shed or scale back pension
obligations to pay their bondholders and senior creditors. Only a Clean Slate
amnesty would wipe out debts without transferring homes and other basic needs
to foreclosing creditors.
Banks, Bankers, Banking: See Finance, Financial Sector and FIRE Sector.
Bankster: Often attributed to Franklin D. Roosevelt, the term emerged from the
Pecora hearings in 1932, when Senator Burton Wheeler of Montana likened
bankers to Al Capone and referred to them as “banksters” to combine banker and
gangster.
Blair, Tony (1953-): British Prime Minister (1997-2007) who used the Labour
Party to further Margaret Thatcher’s privatization policy and untaxing the One
Percent. Fighting bitterly in 2015-2016 to block the Labour Party from returning
to socialist economic policies under Jeremy Corbyn, Blair played on voters’
hopes that they could get rich if they worked hard enough. “Hard-working
families don’t just want us to celebrate their hard work; they want to know that
by hard work and effort they can do well, rise up, achieve. They want to be
better off and they need to know we don’t just tolerate that; we support it.”2 (See
Labor Capitalism and Trickle-Down Economics.) Blame the Victim:
Defenders of Ponzi schemes and kindred frauds claim that they would have
continued if only critics hadn’t destroyed “confidence,” a euphemism for
gullibility by the public. In the run-up to the 2008 junk mortgage crash, New
York Federal Reserve President Tim Geithner announced that the main danger to
the economy was not junk mortgages or other debt leveraging, but economists
warning the public to get out of the market. “There is nothing more dangerous in
what we’re facing now,” he accused, “than for people who are knowledgeable
about this stuff to feed these broad concerns about our credibility and about the
basic core strength of the financial system.”3 It’s as if the Bubble Economy
could have continued to inflate asset-prices with new debt creation ad infinitum
if only doubters had not pointed to how mathematically impossible this was. He
blamed reality economics, not his financial mismanagement on behalf of the
Fed’s Wall Street constituency.
Bond: From the verb meaning “to bind,” originally referring to the shackles by
which creditors kept debtors in bondage. Since debtors’ prisons have been
outlawed, the term has connoted the purely legal shackles by which debtors are
bound to pay their creditors. This state of affairs prompted Ambrose Bierce to
describe debt as “an ingenious substitute for the chain and whip of the slave
driver.”
Entire governments and their populations are now being reduced to financial
bondage. In Eurozone countries this reflects the political choice by client
oligarchies to refrain from monetizing public spending, obliging governments to
borrow from creditors at interest (and subject to Conditionalities) to finance
budget deficits.
Bubble Economy: An economy trying to get rich and pay pensions simply by
financial engineering. The dream is that inflating asset prices for real estate,
stocks and bonds on credit “creates wealth.” But it actually is based on debt
pyramiding. Bank credit raises access prices for housing, stocks and bonds
(increasing the cost of buying a given retirement income as price/dividend ratios
rise). At the corporate level, a stock market bubble based on stock buybacks is
often elaborated into an economy-wide business plan. (See Ponzi Scheme and
Wealth Creation.) A bubble economy polarizes creditors and debtors as the
One Percent holds the 99 Percent increasingly in debt (see Debt Serfdom),
while prices for property rise relative to wage levels and the goods that labor
produces. In due course, bubble economies degenerate into debt-ridden
depressions (see Debt Deflation), increasing unemployment while shrinking
consumption and production.
Bubble Illusion: The idea that rising housing prices (see Asset-Price Inflation)
reflect real wealth creation. The main bubble illusion is in the real estate market
where most bank credit is concentrated.
For example: Suppose Mary Smith owns a $100,000 home free and clear of
debt. Suppose that a year or two later, Jane Doe buys a similar home next door,
but easier bank credit has led mortgage bankers to offer such large loans that the
market for the home rises to $250,000. To outbid other buyers, Jane must take
out a $100,000 mortgage.
Who is in a better financial position? On paper Jane has a $50,000 equity
advantage ($150,000 after her $100,000 mortgage), as compared to Mary’s
$100,000 equity (and no mortgage). But Jane only owns 60% of the home’s
value, and must pay her bank $600 a month – payments that Mary does not have
to make, but which a new buyer of her home would have to pay as the financial
bubble gains momentum.
If and when the bubble bursts, housing prices in the neighborhood fall back
to the $100,000 range. At that point Jane would have no equity (except for the
principal value that she has paid down, unless she took out an interest-only
loan). But she must continue to pay off the mortgage that now absorbs the
property’s entire market valuation.
Home buyers near the peak of the bubble think that the debt-leveraging that
bids up real estate prices is a force of nature, not lax policy. Many blame
themselves for not achieving the prosperity they had hoped for. Journalists refer
to the proverbial “madness of crowds” – blaming the victim – as if bubbles are
not sponsored mainly by governments and financial insiders.
Meanwhile, the Internal Revenue Service refuses to tax rising land prices to
slow financial bubbles, letting the gains be pledged to the mortgage lenders.
After 2008 the Federal Reserve lowered interest rates by Quantitative Easing to
revive the Bubble Economy, aiming to enrich Wall Street once again, by
indebting the economy at large yet more deeply.
Business Cycle: The term “cycle” suggests a natural tendency to recover in due
course, as if the economy were a celestial astronomical cycle. This approach
fosters an illusion that economies will recover from “recessions” by self-
adjusting “automatic stabilizers,” not needing political intervention to alleviate
the rising debt overhead. This ignores the buildup of debt deflation from one
business upswing to the next, leading to stagnation if governments fail to
intervene.
Fig.1
Modern depressions ultimately oblige governments to intervene to promote
recovery, e.g., by Keynesian-type (see John Maynard Keynes) public spending
to re-inflate the economy. That political act from “above” the market is by no
means automatic. But an anti-government ideology gained momentum early in
the 20th century to minimize public policy.
As post-classical economics came to focus on the concept of automatic self-
stabilizing equilibrium, Wesley Clair Mitchell at the National Bureau of
Economic Research depicted “business cycles” in terms of a sequential rise and
ebb of business, with leading, coincident and lagging “indicators.” (See
Economic Forecasting.) The result was much like a sine wave of economic
activity at a steady frequency, as Joseph Schumpeter depicted in his 1939 book
Business Cycles. But crashes occur more rapidly than upswings in the actual
course of business. As economies become more debt-ridden, each recovery is
slower, because it has to carry a heavier debt overhead.
Mainstream business cycle theory fails to explain the exponential buildup of
debt from one recovery to the next, and hence fails to see the ultimate crisis.
Anti-labor, anti-government neoliberals have hijacked “business cycle” theory
by depicting downturns as being caused by rising wages and raw-materials
prices as full-employment and full-capacity operations are reached, cutting into
profits so that growth tapers off (see S-Curve). But the key factor spanning
business cycles is the growth of debt and rising interest charges that stifle profits.
Debt service absorbs the income hitherto spent on new direct investment and
consumption, so employment and production fall off.
The buildup of debt pollution is much like environmental pollution. To
assume that the overgrowth of debt is merely temporary and will be
“automatically” reversed is much like claims that global warming is merely a
weather cycle that will cool down in due course – as if there is no underlying
buildup of carbon dioxide, ozone and other products of our modern carbon-based
energy-driven society. In both cases, economies are left “under water.” In the
face of falling asset prices, the collateral held by banks and other debtors fails to
cover their liabilities. This ends in a panic as assets are liquidated to pay debts
falling due or called in.
Such downturns and crises may be delayed by inflating a bubble economy,
flooding it with enough credit to enable debtors to borrow the interest falling due
(see Ponzi Scheme). This simply adds the accrual of interest to the debt balance,
so that the debt grows exponentially, making the subsequent crash sink all the
more deeply into debt deflation. There is little way to recover without a debt
writedown (see Bankruptcy and Clean Slate) and changes in the economic and
legal environment, but this is deemed to be “exogenous” to business cycle
theory.
C
is for
Casino Capitalism and Client Oligarchy
Capital: From Latin caput, “head,” as in heads of cattle. The term is used
ambiguously. On the one hand it refers to physical means of production in the
form of tools, machinery and buildings. This is the kind of capital referred to by
the term capital formation. In Marxian terms industrial capital is wealth that is
used to employ wage labor. Such capital earns profits as distinct from rent and
interest. But post-classical usage of the term “capital” has been extended to refer
to land, mineral rights or legal privileges for rent extraction.
Finance capital consists of the rentier claims on these means of production
and their revenue. Its dynamics tend to strip the means of production via
interest-bearing debt and other financial claims in excess of the ability to pay out
of current income and production.
Cash Flow: The modern acronym ebitda stands for earnings before interest,
taxes, depreciation and amortization (but not capital gains). This revenue is
available for new direct investment or to pay creditors or stockholders. Under
finance capitalism it is absorbed increasingly by interest charges, on which
companies do not have to pay taxes (in contrast to earnings paid out as
dividends). (See Hudson Bubble Model later in this book for a discussion of cash
flow.) Casino Capitalism: A late or even the final stage of finance capitalism,
based on financial engineering rather than industrial engineering. No tangible
investment is involved in betting that some financial securities will rise or fall
relative to others, based on applying probability theory and correlation to stock
and bond markets or foreign exchange rates. Just as casinos benefit from the
edge in probability (the 0 and 00 slots on a roulette wheel), investment bankers
benefit from their rakeoff of commissions and interest paid by the arbitrageurs
for credit in the financial casino.
The Wall Street casino has gained more rapidly than almost any other sector.
This does not mean that it is a victory by the most productive and fittest
economic policies. “When the capital development of a country becomes a
byproduct of the activities of a casino,” wrote John Maynard Keynes, “the job is
likely to be ill done.”
Central Bank Reserves: Since gold was phased out of settling balance-of-
payments deficits in 1971, central bank reserves have consisted mainly of U.S.
Treasury debt. The United States spends dollars into foreign economies by
running deficits, which result largely from its global military spending. The
lion’s share of central bank reserves thus represents a monetization of this U.S.
geopolitics.1 The BRICS (Brazil, Russia, India, China and South Africa) have
moved to free themselves from dollar dependency by shifting to their own inter-
governmental credit denominated in their own currencies.
Chartalism: A technical term for the State Theory of Money. As Henry Liu
has described: “When the state issues fiat money under the principle of
Chartalism … behind it is the fulfillment of tax obligations. Thus the state issues
a credit instrument, called (fiat) money, good for the cancellation of tax
liabilities. By issuing fiat money, the state is not borrowing from anyone. It is
issuing tax credit to the economy.”2 (See Modern Monetary Theory.) Chicago
Boys: After the Kissinger-Pinochet 1973 military coup in Chile, University of
Chicago economists were brought in to give away public enterprises to the
junta’s supporters. To silence criticism of Chile’s privatization of social security,
to let corporate owners loot pension plans, to end public subsidies and to break
labor union power, they shut down every economics department in Chile except
that of the Catholic University where the Chicago School had gained control.
(See Labor Capitalism, Privatization and Washington Consensus.) These
anti-government ideologues recognized that their brand of “free markets” and
giveaway of the public sector required that no economic alternative be permitted
or even discussed, but could only be imposed at gunpoint with totalitarian
political control. Their neoliberal version of “free markets” is akin to medieval
conquerors appropriating the land and basic infrastructure by force of arms. The
aim is to privatize economic rent, and weaken the power of communities by
rolling back democracy. This is typically done by establishing client oligarchies
and economic dukedoms.
Circular Flow: The earliest model of circular flow was the Tableau
Économique by the royal surgeon and founder of Physiocracy, François
Quesnay. Inspired by the circulation of blood in the human body, he traced the
flow of receipts and payments among landlords, industrialists, labor and
government. His followers urged that land rent be used as the tax base,
influencing Adam Smith.
Most economic models since J. B. Say have focused on the reciprocal flow
of income between producers and consumers. Malthus and Ricardo, for instance
debated over just how landlords spent their rent – on consumer goods, imported
luxuries and payments to servants and other labor. Under Say’s Law equilibrium
is maintained when income paid for production is matched by consumption,
enabling the economy to keep growing. Employers pay their workers, who spend
their wages to buy what they produce. That is why Henry Ford paid them the
then-towering $5 a day, so that they could afford to buy his automobiles.
However, the economy’s debt overhead grows from one business upswing to
the next, diverting a rising proportion of income from production and
consumption to pay interest charges. This reduces spending on current output,
draining the circular flow much like bleeding the body.
Such growth in debt service may be offset by new lending. But post-2008
Federal Reserve and Treasury credit to Wall Street has not been for business
investment. It has taken the form of bank bailouts, which have been used largely
for casino capitalist arbitrage. This central bank money creation circulates only
within the asset and debt markets, not through the “real” economy of production
and consumption.
Clark, John Bates (1847-1938): U.S. economist who spearheaded the rejection
of classical rent theory and sought to refute socialist claims that labor was
exploited. Clark depicted rentiers – landlords, financial magnates and
monopolists – as earning their income by adding to output. He maintained that
everyone earned precisely what they contributed to production, so that no
exploitation existed and there was no such thing as unearned income. “It is the
purpose of this work,” he wrote in the introduction to his 1899 Distribution of
Wealth, “to show that the distribution of the income of society is controlled by a
natural law, and this law, if it worked without friction, would give to every agent
of production the amount of wealth which that agent creates.” This stripped
away the concept of economic rent from mainstream theory. As Simon Patten
wrote: “According to the economic data he presents, rent in the economic sense,
if not wholly disregarded, at least receives no emphasis. Land seems to be a form
of capital, its value like other property being due to the labor put upon it.”3
Clark’s whitewashing of real estate, banking and monopolies was so
appreciated by Wall Street that the American Economics Association –
gatekeepers of mainstream economics in the United States – created the John
Bates Clark Medal in 1947 to award economists under the age of 40 judged to
have made significant contribution to economic thought and knowledge in
Clark’s tradition. It is a tradition in which rentiers appear to play a productive
role. The award provides an incentive for young economists to depict an
economy in which unearned income and exploitation do not appear. (See my
chapter “Methodology is Ideology” in this book for how methodology
determines content.) Clash of Civilizations: A term of invective coined by the
neoconservative Samuel Huntington in 1992. He depicted Communism, Islam,
and government ownership and regulation as enemies of U.S.-centered
globalism – the “free market” for Wall Street investors that he deemed to be the
culmination of Western civilization. (See End of History.) “The West” is
Huntington’s inflated euphemism for Wall Street finance capitalism and the
military-industrial complex. His bellicose celebration of U.S. unilateralism from
NATO to the Pacific helps distract attention from the West’s oligarchic war to
reverse the Enlightenment’s reforms that aimed at freeing industrial capitalism
from rent seeking and financialization. In his book From Plato to NATO (1998),
David Gress traces how this neoliberal view led to a rewriting of history: “The
Cold War depicted itself as a war of the West – embodying civilization and
progress itself – against the Soviet Union, as earlier it had been World War II
against Germany and World War I against the German Hun.” The University of
Chicago’s curriculum of monetarism and “free markets” traces Western
civilization only back to an idealized image of Greece and Rome.4
The actual origin of Western economic enterprise lies in Mesopotamia’s
palace-centered mixed economies. This Bronze Age origin has been replaced by
a travesty of history in which a new civilization of Indo-European-speaking
individualists spontaneously created markets and political democracy. It is as if
the westward migration of Near Eastern innovations after 1200 BC did not
culminate in oppressive oligarchies in Greece and ultimately Rome as credit was
privatized and the traditional clean slates gave way to harsh creditor-oriented
laws. So what is thought of as Western civilization is in large part the removal of
credit and markets from their archaic contexts to benefit a landed financial
oligarchy.
Today’s civilization stands at a crossroads similar to that of Rome in its
violent civil war between creditors and debtors from 133 to 29 BC, giving way
to a Dark Age of mass poverty under concentrated proto-feudal property
ownership. Once again, a clash within “Western” civilization is occurring over
whether a creditor oligarchy will reduce vast populations to peonage. This seems
to be an eternal problem of all civilizations.
Class Consciousness: This term traditionally has been associated mainly with
the working class, but the elites may have an even stronger feeling of solidarity
as a cohesive class. Their view of their place in the economy is much like that of
England’s Norman conquerors, who extracted rental and tax tribute. The
medieval Arab historian Ibn Khaldun attributed the conquests by pastoral
nomads such as Genghis Kahn and Turkish tribes moving into Europe to the
binding force of asabiyyah (asabiya), or social cohesiveness. His Muqaddimah,
an introduction to a history of the world published in 1377, explained the rise
and fall of nations and empires as reflecting the degree to which marauding
tribes held together as an ethnic unit, whose mutual aid and shared goals spanned
economic classes. Today’s financial class is cosmopolitan rather than ethnic or
nationalist, absorbing client oligarchies into its ranks. (See Company.) What is
needed for economic success as a class is self-consciousness of common
interests. Labor has won concessions from industry, but has not deterred finance
from exploiting wage earners via mortgage lending, personal debt and pension-
fund capitalism. Wealth is concentrated at the top of the economic pyramid as
banks and bondholders gain control of industry and move to take over
governments. Their political aim is to shift taxes off finance and its major
clients, and to force taxpayers to pay interest to private bondholders. (See
Neoliberalism and Washington Consensus). It seems as if today’s working
class (The 99 Percent) does not realize that a class war is being waged against
them – or that as Warren Buffett said of his own One Percent, “we are winning
it.”
The financial strategy in this class war is to popularize “identity politics”
prompting voters to think of themselves as women, ethnic or racial minorities, or
sexual categories (LBGTQ) instead of economic categories such as wage
earners, debtors and/or renters. True identity politics should begin with
economic class consciousness, solidarity and mutual aid. There can be little
promotion of group self-interest without this.
Class Struggle: The 19th century’s characteristic class conflict saw industrialists
fight to keep profits high by keeping money wages low. This was to be achieved
by promoting free trade so as to buy food and necessities more cheaply abroad –
and by taxing landlords instead of labor and its necessities. Ricardian value
theory assumed that raw manual labor would earn mere subsistence wages in any
case. So lower prices for food and necessities would mean that industrialists
could pay lower money wages to hire workers. Importing low-priced food would
therefore save employers money, as money wages would fall to subsistence
levels.
The main political struggle accordingly was between capitalists and
landlords, with capitalists aiming to minimize economic overhead in the form of
land rent and monopoly rent. The class struggle by the industrial capitalist class
began as a fight against landlords who sought protective agricultural tariffs
(Britain’s Corn Laws) to keep food prices (and hence, subsistence wages) high.
After the bourgeois revolutions of 1848, the fight against the landlord class was
well on its way to being won, giving way to the class struggle against labor
unions and socialists over wages and working conditions.
Class conflict has always been concerned with whether the tax burden should
fall on land rent (landlords), business profits or consumer spending. But now that
the banking and financial sector finds its major source of business in real estate
(accounting for 70% to 80% of bank loans) – followed by mining and other
privatized natural resources and public monopolies such as water, power and
communications – interest is paid more out of economic rent than out of
industrial and business profits. The financial sector accordingly has joined forces
with real estate, natural resource extraction and other monopoly rent seekers.
These rentier sectors now struggle jointly against labor.
Commons: Public assets (land, water, mineral rights, airwaves and other public
infrastructure). As natural monopolies, they are best administered in society’s
long-term interest via government or a community, not monopolized by rentiers
as the ultimate takeover objective of finance capital.
It is an old story. Medieval rulers seeking war loans were obliged to pledge
public assets to their creditors. The Habsburgs forfeited the royal mercury mines
in Spain to the Fugger financial family. Britain’s government created royal trade
monopolies such as the South Sea Company and Bank of England to sell off to
bondholders.
Today’s tactic to pry away the public domain is still to get governments into
debt to bondholders. Under neoliberal IMF or World Bank programs, Greece
and Third World debtors have been forced to privatize their public domain
resources. (See Kleptocrats.) Claiming to be more efficient than public
management, rent seekers use spurious junk economics (see Tragedy of the
Commons) to depict government bureaucracy as always an evil to be
eliminated, to justify privatizing the public domain.
Fig.3
The phenomenon was known already in the Old Babylonian period c. 2000 BC
by the term “interest on interest” (mash mash). However, loan contracts were for
a specified duration, and when they expired the creditor had to draw up a new
contract to receive further interest. Personal agrarian debt was frequently
cancelled by royal clean slates. But modern mainstream economics treats interest
only on a microeconomic level, as a contract between borrower and creditor in
which everyone gains and debts always are able to be paid – as if there were no
inherent tendency for debt to grow beyond the ability to be paid.
The reality is that interest-bearing debt grows exponentially, extracting
revenue from the economy at an accelerating pace. The ensuing debt deflation
slows economic growth, which tapers off in an S-curve – making it harder to
carry and pay off debts, culminating in a debt crisis.
The bankers’ ideal is to keep their loans multiplying ad infinitum. That is the
essential principle of Ponzi finance. Before 1972 it was normal for international
banks to lend Latin American countries the interest charges falling due on their
foreign debt each year. Then came the collapse, when Mexico said it could not
pay the exponential debt accrual. In the United States, by 2005 this bank practice
of adding the interest onto the debt characterized more than 20% of reported
U.S. home mortgage loans. “Freeing” debtors from having to pay down the
principal left their debts to mushroom exponentially instead of being paid off.
When indebted economies or their governments (or homeowners) cannot pay
(see “Debts that can’t be paid, won’t be”), foreclosure time arrives. This
causes the crises that distinguish modern business cycles. In the past they wiped
out savings along with the bad debts. But after 2008 savings were not wiped out.
The debts were left in place. That is why there has been no normal recovery. The
One Percent have gained financially from central bank quantitative easing to
reinflate the stock and bond markets, but the “real economy” of production and
consumption is suffering from debt deflation, which is getting more severe.
The coming political fight will be over whose interests will be sacrificed in
the face of the incompatibility between the financial expansion path of debt and
the economy’s ability to grow. No matter how well banks are managed at any
given moment of time, a debt crisis is inevitable because of the inherent
mathematics of compound interest. At issue is whether debts will be left on the
books to burden economies with mathematically untenable overhead, or be
written down by legislating a Clean Slate. A debt amnesty is necessary at the
point where the economy becomes so over-indebted that new investment and
employment dry up.
Conditionalities: The requirement by the IMF and World Bank that indebted
governments impose austerity programs of the sort forced on Latin American
and other debtors in the 1970s and 1980s. Debtor countries are told to shift taxes
off property and finance onto labor, privatize the commons (public assets and
enterprises) and deregulate their markets (see Washington Consensus). In
exchange, creditor nations refrain from wrecking the banking systems of debtor
countries or overthrowing their governments with regime change.
Conditionalities often involve currency devaluation, lowering the
international price of labor while raising import prices and hence living costs.
Local client oligarchies are enabled to protect their fortunes by capital flight,
subsidized by IMF currency support long enough to enable bondholders and
other elites to sell off. These conditionalities exacerbate the debt problem,
polarizing the economy and requiring even steeper conditionalities in a
chronically deepening dependency crisis that pushes victimized nations into debt
bondage.
Conservatives: People seeking to conserve the status quo and power of the
vested interests. In the 19th century they fought to preserve the legacy of
feudalism by blocking parliamentary reform and its seeming evolution toward
democratic socialism. In the United States, Republican Jim DeMint of South
Carolina spelled out the conservative political strategy in a nutshell when he left
the Senate to head the Koch-backed Heritage Foundation: “Obstruct, obstruct,
obstruct” to stop so-called big government from enacting changes that would
favor the 99 Percent. One could add “privatize, privatize, privatize” and “delay,
delay, delay” to round out their political strategy. That is the spirit of
conservatism through the ages.
Consumer: The media’s preferred euphemism for wage earner, viewed in terms
of “free choice” for how to spend wages – without reference to having to work
for a living (see Middle Class). Most consumers are obliged to be debtors
merely to survive. On their road to debt peonage, their obligatory payments to
the FIRE Sector leave less and less truly disposable personal income. But the
word “consumer” implies that paying debt service, housing costs and similar
charges is like buying the commodities that labor produces, not paying
compulsory tribute to rentiers. (See Circular Flow.) Consumer Demand: A
patronizing euphemism to promote the idea that the “consumer is king” with the
power to “demand” what they want, telling producers what to sell – as if
advertisers and mass-market producers do not shape consumer tastes with a take-
it-or-leave-it choice.
Statistically, consumer spending is much less than the official measure of
disposable personal income (net of taxes, wage withholding for Social Security,
health care and pensions). Actual consumption is also net of monthly debt
service (but plus new borrowing) and housing charges. This available residual
shrinks as the economy succumbs to debt deflation.
Consumer Price Index (CPI): A measurement of typical current retail prices
for goods and services paid by consumers, to show the effect of inflation on their
purchasing power.
Credit: The act of establishing a debt on the part of a loan recipient, customer,
or taxpayer. Debts are recorded statistically as the creditor’s saving, so credit and
debts rise and fall together. (See Accounting.) An economy’s volume of debt is
equal to the initial advance of credit (including unpaid debts) plus accrued
interest. So the self-expanding volume of debt increases “savings” on the other
side of the balance sheet. Today, the purchase of housing and education is
financed on credit. The question is, what will rise faster: the asset’s market price,
or the debt attached to it? (See Bubble.) Archaic economies operated on the
basis of gift exchange and, by the Neolithic, of cultivators running up debts
during the planting season, to be paid at harvest time on the threshing floor in
kind. Little exchange until after 2000 BC was paid in cash (money), because
income came in periodic or seasonal lumps (e.g., the harvest or the return of a
voyage). Export goods were advanced to merchants on credit, to be paid (with
interest) upon the successful completion of the voyage. (If unsuccessful, the debt
was cancelled.) The “credit stage” of economic development is thus the original
and major stage in the “three stage” evolution of exchange. Governments
developed a money economy as a means of allocating resources and collecting
taxes and public fees that built up during the harvest year. Money is a form of
credit, initially issued by public institutions and now created by commercial
banks. But as empires seized and looted precious metals, their economies later
collapsed into barter as in the post-Roman Dark Age.
Crime: Honoré de Balzac observed that most great fortunes originate from theft,
corrupt insider dealing or property grabs whose details are so lost in the mists of
time that they have become legitimized. Heading the list of hereditary power
elites are the real estate families, railroad barons, oil and natural resource lords,
and privatizers of monopolies. As crime becomes larger and more successful, it
becomes financialized and decriminalized. Victims and reformers who protest
are prosecuted.
An example of how unthinkable it is to include crime along with other rent-
seeking activities is shown by the fact that in 2014 the Ig Nobel Economics Prize
(on contrast to the “real” fake Nobel) was awarded to the Italian government's
National Institute of Statistics (ISTAT) for complying with an EU regulatory
mandate to include revenue from illegal drug sales, prostitution, smuggling, etc.
in its measure of GDP. Neoliberal economics logically treats what used to be
viewed as crime as part of the free market – which is why Wall Street banks are
treated as adding to GDP instead of prosecuting their managers for fraud and
subtracting their takings from GDP.
Criminal: Someone who steals or cheats on too small a scale to afford the legal
or political protection needed to avoid prosecution. It is a matter of scale and the
degree to which one is a political insider. St. Augustine wrote in The City of God
of what a pirate said when captured by Alexander the Great: “Because I do it
with a little ship only, I am called a thief; you, doing it with a great navy, are
called an emperor.”
Regarding political and legal theft, the greatest seizures are from the public
domain by insider dealing, as capsulized in a 17th-century folk rhyme: “The law
locks up the man or woman Who steals the goose off the common, But leaves
the greater villain loose Who steals the common from the goose.”
As Franklin Roosevelt explained in announcing his Second New Deal in
October 1936: “Government by organized money is just as dangerous as
government by organized mob,” meaning the Mafia crime mob. But instead of
jailing malefactors, civil fines are only levied against their companies, to be
borne by their stockholders. Today’s emperors of finance have achieved a status
above the law, having warned the legal authorities that they will crash the
economy if deceptive lending practices are prosecuted.
Debt
Debt Cancellation/Clean Slate
Debt Crisis
Debt Deflation
Debt Dependency
Debt Drag
Debt Leveraging
Debt Overhead
Debt Peonage
Debt Pollution
“Debts that can’t be paid, won’t be”
Decline of the West
Decontextualization
Deflation
Demagogy
Democracy
Democratization of Credit
Denial
Dependency
Depreciation
Deregulation
Derivatives
Diminishing Returns
Discretionary Income
Dismal Science
Dismal Science
Disposable Personal Income (DPI)
Dollar Hegemony
Dollar Standard
Doublespeak
Doubling Time
Dutch Disease
Dutch Finance
Dystopia
Debt: One party’s debt is another’s saving or credit. A bank deposit is a debt to
the depositor. Money is a government or bank debt. (See Accounting and
Balance Sheet.) Most debt is owed to the One Percent, who account for most of
the saving, receiving interest from the 99 Percent. For a discussion of corporate,
foreign, household, government and real estate debt, see my book The Bubble
And Beyond: Fictitious Capital, Debt Deflation and Global Crisis (2012).
Debt Dependency: When countries rely on the IMF and other creditors for loans
to avoid defaulting on payments owed to their bondholders, the conditionalities
include austerity programs, privatization sell-offs, and replacement of elected
officials with financial technocrats to act on behalf of creditors. The ostensible
“cure” to pay off debts leaves these countries even more debt-strapped.
Debt Drag: Akin to fiscal drag, the rate at which income earned in the
production-and-consumption sector is diverted (“leaked”) to pay to creditors.
Debt Leveraging: The ratio of assets one can buy with a given amount of one’s
own money (equity). A 90% debt-leveraging ratio means that one has to put
down only 10% of the purchase price to buy a home or stock. The risk involved
is that a 10% decline in the asset’s market valuation wipes out the equity
investment. But if the asset’s price rises by just 10%, one doubles one’s equity
money. In a more extreme example, a 99% ratio means that one has to put up
only 1%. This means that a fall of 1% wipes out the equity. But if the asset’s
price increases by just 1%, one doubles the equity down payment.
Buying entirely on credit is 100% debt leveraging – an invitation to
speculation. Any decline at all leaves the 100% debt-leveraged investor owing
money to the creditor. But any gain is a free lunch.
The tendency of asset-price inflation to inflate capital gains far in excess of
interest rates explains the attractiveness of financial bubbles – and also why
these end in bankruptcy.
Debt Overhead: The cost of carrying debts (and hence, the economy’s volume
of savings). The direct cost includes interest and dividends, amortization and
other financial charges. Late fees and penalties now absorb nearly as much as
interest charges for U.S. credit card companies. This overhead grows
exponentially at compound interest. But creditors euphemize this as wealth
creation, focusing on the mirror-image asset (“savings”) side of the balance
sheet. This debt salesmanship works as long as the increase in debt inflates asset
prices at a faster rate.
Fig.4
Debt Peonage: The obligation of debtors to provide their own labor (and/or that
of family members) to creditors to carry the debt and its interest charges. The
Columbia Encyclopedia describes debt peonage as spreading from Spanish
America after its independence from Spain in the 1820s:
To force natives to work, the plantations got them into debt by giving
advances on wages and by requiring the purchase of necessities from company-
owned stores. As the natives fell into debt and lost their own land, they were
reduced to peonage and forced to work for the same employer until his debts and
the debts of his ancestors were paid, a virtual impossibility. He became virtually
a serf, but without the serf’s customary rights. … By 1910 [U.S.] court decisions
had outlawed peonage, but as late as 1960 some sharecroppers in Southern states
were pressured to continue working for the same master to pay off old debts or
to pay taxes, which some states had levied to preserve the sharecropping system.
Debt peonage in today’s postindustrial economy takes the form of obliging
homebuyers, student debtors and others to spend their working lives paying off
their mortgages, education loans and other personal debts, which typically must
be taken on in order to survive.
“Debts that can’t be paid, won’t be”: Over time, debts mount up in excess of
the ability of wide swaths of the economy to pay, except by transferring personal
and public property to creditors. (For the mathematics of why financial
polarization occurs, see Compound Interest and my Bubble Economic Model
article in this volume.)
The volume of debt owed by businesses, families and governments typically
is as large as gross domestic product (GDP) – that is 100%. If the average
interest rate to carry this debt is 5%, the economy must grow by 5% each year
just to pay the interest charges. But economies are not growing at this rate.
Hence, debt service paid to the financial sector is eating into economies, leaving
less for labor and industry, that is, for production and consumption.
Greece’s debt has soared to about 180% of GDP. To pay 5% interest means
that its economy must pay 9% of GDP each year to bondholders and bankers. To
calculate the amount that an economy must pay in interest (not including the
FIRE sector as a whole), multiply the rate of interest (5%) by the ratio of debt to
GDP (180%). The answer is 9% of GDP absorbed by interest charges. If an
economy grows only at 1% or 2% – today’s norm for the United States and
Eurozone – then any higher interest rate will eat into the economy.
Paying so much leaves less income to be spent in domestic markets. This
shrinks employment and hence new investment, blocking the economy from
growing. Debts cannot be paid except by making the economy poorer, until
ultimately it is able to pay only by selling off public assets to rent extractors. But
privatization raises the economy’s cost of living and doing business, impairing
its competitiveness. This process is not sustainable.
The political issue erupts when debts cannot be paid. The debt crisis requires
nations to decide whether to save the creditors’ claims for payment (by
foreclosure) or save the economy. After 2008 the Obama Administration saved
the banks and bondholders, leaving the economy to limp along in a state of debt
deflation. Economic shrinkage must continue until the debts are written down.
Decline of the West: The first decline occurred with the collapse of the Roman
Empire under the debt burden that stripped its capital and reduced most
economic life to the Dark Ages of local self-sufficiency (see Feudalism).
Market exchange and money survived almost exclusively for the One Percent
(whose luxury trade has prompted economic historians to chirp that the Dark
Ages may have been not so dark after all). A new Dark Age for the 99 Percent
threatens to recur today as a result of the financialized economy’s debt deflation
and asset stripping.
Dependency: A loss of choice – often to creditors today, and in times past to the
landed aristocracy monopolizing farming and housing space. The Washington
Consensus aims to minimize the ability of economies to choose policies not
deemed to be in the interest of the United States. Debt leverage is wielded to
make foreign countries accept IMF conditionalities and depend on U.S. dollar
credit, food exports and essential technology, while selling the “commanding
heights” of their infrastructure to mainly U.S. investors. Democratic voters are to
relinquish politics to the central banks, which are to be run preferably by alumni
from Goldman Sachs, Harvard or other neoliberal institutions. (See Dollar
Hegemony and World System.)
Deregulation: The proper role of government is to set rules for economic and
social behavior. Deregulation represents undoing this power. The effect in
today’s economies is to shift planning to financial managers, while rentier
interests take the lead in dismantling anti-monopoly rules and safeguards against
fraud and other predatory behavior. (See Crime and Planned Economy.)
It would be wrong to treat such deregulation as synonymous with a classical
free market. Adam Smith warned – with specific regard to bank regulation – that
the exertions of the natural liberty of a few individuals, which might endanger
the security of the whole society, are, and ought to be, restrained by the laws of
all governments; of the most free, as well as of the most despotical. The
obligation of building party walls, in order to prevent the communication of fire,
is a violation of natural liberty, exactly of the same kind with the regulations of
the banking trade which are here proposed. (Wealth of Nations, Book II, Ch. 2,
§94).
Derivatives: The often opaque financial instruments such as credit default swaps
or cross-option bets created by investment bankers euphemized as “risk
management.” Sales to gullible pension fund managers and others played a key
role in the 2008 financial crisis. (See Casino Capitalism, Efficient Market
Hypothesis and Too Big To Fail.)
Discretionary Income: Income that recipients can spend at their own discretion
after meeting non-discretionary obligations, headed by debt service, rent and
mortgage payments, and for basic necessities such as food, essential
communications and transportation. (See Hudson Bubble Model in this book for
a more detailed discussion.) Government budgets classify interest payments and
military spending as non-discretionary, while social welfare and other long-term
programs are categorized as discretionary – meaning that they can be cut back,
being subordinate to financial claims by bondholders.
Disposable Personal Income (DPI): National income statistics (see NIPA and
Hudson Bubble Model) define DPI as what wage earners take home after
deduction of state and local income taxes (20% to 30%) and FICA paycheck
withholding for Social Security and Medicare (currently more than 15%). This
measure logically should include property taxes, as well as sales taxes and on
what consumers buy.
What remains is far from being freely disposable for discretionary spending
on the goods and services that labor produces. A number of expenses must be
paid “off the top,” mainly to the FIRE sector. These expenses are headed by
housing charges for mortgage payments (up to 43% of personal income) or rent,
plus debt service (interest and fees) to banks or other creditors (about 10%), plus
non-public pension and health care set-asides. When banks scaled back their
lending and credit card exposure, most households were obliged to pay down the
debts they had taken on. Such quasi-saving is squeezed out of family budgets,
not available for discretionary spending. These payments to the government and
the FIRE sector leave only a quarter to a third of wages really disposable for
spending on goods and services.
If tax policy treated labor like capital, only this net after-expense income
would be taxed. Basic living expenses are the household equivalent of business
operating costs – and businesses are able to deduct all their operating costs (and
more!) from their taxable income. Taxing personal income as measured before
netting out these basic expenses such as businesses are allowed to deduct
imposes a much heavier burden on labor, adding to its cost of living – while
shifting the tax burden off the rentier sector.
There is no measure of disposable personal income that reflects household
“total returns” – income plus capital gains or losses (e.g., the rise or decline in
the market price of homes and financial securities). Such a measure would have
shown prices for homes falling after 2008, offsetting the Bubble Economy’s
earlier gains. The balance sheets of the most recent homebuyers were left in
negative equity (debts exceeding the market value of their assets).
Doublespeak: A term coined by George Orwell in his novel 1984 to signify part
of Big Brother’s Newspeak euphemistic vocabulary obscuring an ugly reality.
Mainstream economics calls rising debt pyramiding wealth creation, while
deregulation of the financial sector is called a free market. Conversely,
demagogues call public regulations to protect populations from exploitation and
debt peonage a road to serfdom, not away from it.
Doubling Time: The time it takes for an interest-bearing loan, savings deposit
or debt (or other rate of increase, such as price inflation) to double. (See
Compound Interest and Rule of 72.) At 5%, the doubling time is just over 14
years:
Dutch Disease: The curse of rich natural resources, especially oil. The
Economist, which coined the term in 1977, explained:
“Large gas reserves had been discovered in 1959. Dutch exports soared. But …
from 1970 to 1977 unemployment increased from 1.1% to 5.1%. Corporate
investment was tumbling. We explained the puzzle by pointing to the high value
of the guilder, then the Dutch currency. Gas exports had led to an influx of
foreign currency, which increased demand for the guilder and thus made it
stronger. That made other parts of the economy less competitive in international
markets.”4
This definition might equally well apply to Australia during its boom in iron
ore exports. In both cases the added liquidity spilled over into a real estate
bubble, discouraging industrial competitiveness by increasing the cost of living
to new homebuyers.
“The curse of oil” applies above all to non-industrial economies. Their oil
and gas subsidize economic self-indulgence, not unlike the case of trust-fund
children inheriting enough wealth so that they never have to work and take
control of their own fate. (See Affluence and Neoliberal Disease.) “Free”
natural resource rent encourages dependency on nature instead of industry. The
curse is political as well as economic, supporting kleptocracies and autocratic
rulers in control of natural resources, most notoriously in Saudi Arabia and
neighboring Oil Gulf states. Such regimes tend to be client oligarchies of the
major international oil and mining corporations (and hence of the U.S., British
and French governments).
Closing these subsidies for rentiers would oblige the One Percent to pay a larger
share of taxes.
An analogous measure of ebitda for wage-earners is how much personal
income is disposable after wage withholding for Social Security and medical
care (over 15%), income and sales taxes (t, perhaps 15% to 20%) and pension
set-asides, as well as the monthly “nut” of interest and housing (rent or mortgage
30% to 40%), other credit card and bank debt (i, up to 10%), leaving only about
30% available for actual consumer spending. Most marginal income growth
since 1980 has been for rent, interest and other debt service, not for spending on
goods and services. (See Debt Deflation and Disposable Personal Income.)
Charting these components of the National Income and Product Accounts
(NIPA) shows that a rising proportion of income growth since 1980 has been for
rent, interest and other debt service.
Economic Rent: Price minus Value (P – V). The excess of market price over
intrinsic cost (value). Rent was the classical term for income that has no
counterpart in necessary costs of production. Rent recipients have no out-of-
pocket costs for supplying land or monopoly “services” for what basically are
transfer payments.
In David Ricardo’s model, landlords owning the most fertile soils receive the
largest groundrent, a free lunch paid out of crop prices set at the high-cost
margin. As in the case of monopoly rent, reducing such rent does not lead a
production input such as land to be withdrawn, because it is supplied by nature
or otherwise extraneously to its recipient’s own efforts.
In industry, the British economist Alfred Marshall (whose 1890 book
Principles of Economics was the dominant economic textbook in England for
many years) described quasi-rents as accruing to innovative producers with
lower costs of production, under conditions where market demand enables prices
to be set by the older higher-cost producers. (See Monopoly Rent, Rentier,
Rent Theory, Free Lunch and Unearned Income.) Economics: The linguistic
roots of the word “economics” stem from Aristotle’s Greek terms oikos (house
or household) and nomos (rule). This often is trivialized as self-sufficient
“household management,” in contrast to chrematistics, making money by market
exchange and money lending. But economic organization and markets always
have been wrapped in a political context as mixed economies. The paradigmatic
“household” was the Mesopotamian “large house” (Sumerian and Babylonian
é.gal), the temples and later the palaces in which accounting, weights and
measures (including the origin of money), standardized interest and wage rates
are first documented.1 Most merchants in Mesopotamia’s takeoff occupied
official status in the royal bureaucracy, adopting management techniques from
the large institutions. Prices were denominated for accounting purposes and for
payment of debts to these large institutions, but were free to fluctuate outside of
the city gates and outside of the temple and palace sector.
It thus is a travesty to narrow the study of economics to “markets,” defined
simplistically as private sector households earning and spending their income on
goods and assets. All markets operate in the context of public regulation,
taxation and government spending. To provide basic services, including those of
the military and religious infrastructure.
Economic theory in modern Europe started as Political Arithmetic for royal
management. The key concerns were money, taxes, and the trade policy needed
to obtain silver and gold. James Steuart (1713-1780) called the latter “money of
the world” and related it to population growth and immigration, colonialism and
export production. Classical political economy shifted the focus of economics
to domestic value, price and rent theory with a view toward political reform to
check the power of landlords and other rent extractors.
End Time: The Biblical End Time was the time of troubles leading to
apocalyptic turmoil. It was to culminate in a grand Jubilee Year, a new start in
which personal debts were annulled and everyone would be restored to their
idealized original state of liberty.
Jesus had a long Judaic and earlier Babylonian tradition to draw on when he
announced that he had come to proclaim the Year of the Lord – the “good news”
(gospel) that personal debts were to be annulled (Luke 4). Today, Christianity
and Judaism have dropped their original focus on debt relations and the Jubilee
Year that formed the basis for social reform. Only marginal palliatives, such as
more government spending or charity, are being discussed to cope with today’s
financial polarization between creditors and debtors.
What is ending today is the long arc of industrial capitalism that promised to
raise productivity and living standards to usher in a leisure economy of
abundance. Instead of enjoying shorter work weeks, families are having to work
longer just to carry the debts they need to take on to buy a home of their own, an
education and to meet other basic needs. The result is today’s counterpart to
medieval serfdom – a looming epoch of debt peonage for entire economies. The
new hereditary lordship class is headed by the financialized One Percent holding
the 99 Percent in deepening debt, much as occurred in ancient Rome and Greece.
Today’s End Time is a similar tumultuous transition period, driven by the
burden of debts exceeding the ability to be paid, and continuing to grow rather
than being written down. Deepening austerity and poverty produce an
apocalypse of disease, environmental disaster and collapse of the old order.
Environment: The context within which trends unfold. Much as the ecological
environment is deteriorating as a result of global warming and pollution, the
legal and political context of economies is becoming more unbalanced – the
distribution of wealth and income, savings and debt. In contrast to the over-
simplified assumption underlying correlation analysis of trends – that the
environment remains constant – there is an ongoing self-transformation as a
result of feedback between the economy, its social context and the natural
environment. (See Externality and World System.) Equilibrium theory
ignores these relationships. For instance, the financial analogue to environmental
pollution and rising sea levels is debt pollution as the deluge of compound
interest submerges the economy’s balance sheets under water. (See Economic
Forecasting.) Equilibrium: Mainstream economics teaches that the status quo
is self-stabilizing. Any disturbance is supposed to set in motion feedback
adjustments to establish a new stable balance, in which each factor of production
receives its fair economic value. If this really were true, there would be no
serious structural problem – and no need for governments to “interfere” by
redistributing income or wealth.
Such tautological models seem irrelevant once it is recognized that a man
falling on his face is in equilibrium at the point where his head hits the ground.
Death is a state of equilibrium – as is each moment of dying. Global sea levels
20 or 30 feet higher would be another equilibrium. By this logic, any economy
and any status quo seems to be in a state of equilibrium at any given point in
time.
Most “market equilibrium” analysis deals only with small marginal changes.
This way of thinking makes equilibrium theory an anti-reform ideology, because
it do not recognize structural problems that need to be cured by government
intervention from “outside” the economy, such as running “Keynesian” budget
deficits to restore employment. Falling wages are supposed to do the trick. (See
Efficient Market Hypothesis.) Yet most economic dynamics are exponential
and therefore are polarizing, headed by compound interest.
A third-world debtor economy is deemed to be in equilibrium under
conditions where it suffers capital flight and emigration and must sell off the
pubic domain to pay foreign creditors. Mainstream equilibrium theory ignores
such structural environmental effects as being “off the balance sheet,” that is, not
part of “the market.” Short-term investors simply don’t care!
It therefore is necessary to ask just what is supposed to “adjust” to what, and
how the adjustment process affects the distribution of income and wealth. For
example, when a leading British economist, William Nassau Senior, was told in
1845 that a million Irishmen had died in the potato famine, he replied that this
was not enough! The famine “would not kill more than one million people, and
that would scarcely be enough to do any good,” being insufficient to bring the
Irish people’s ability to live in keeping with their ability to spend, given the
ownership of their land by British landlords.4 Rising inequality is blamed on “the
market,” not on vested interests pushing economies out of balance.
International trade theory is an especially egregious application of
equilibrium theory. Abolishing protective tariffs to “buy in the cheapest market”
is supposed to make all economies richer. No long-term consequences are
recognized, because equilibrium theory applies only to the short run. It implies
that countries will converge internationally, not explaining why the global
economy is polarizing.5
Instead of basing economic analysis on equilibrium theory, the mathematical
economist Steve Keen emphasizes complex instability. “Not only is equilibrium
no longer necessary, the continued use of the construct of equilibrium by
economists is, without doubt, the major barrier to progress in the field. … even
more so than the weather, the economy is a complex system, and it is never in
equilibrium.”6
When an economy gets out of balance, especially as a result of financial
dynamics, self-reinforcing tendencies push it further out of balance. Systems
analysis calls this positive feedback. By becoming disruptive, economic
dynamics force a political decision to be made. But this is deemed an
“externality,” which is “exogenous” to equilibrium models (see Externality).
Although economists define their discipline as allocating scarce resources
among competing ends, when resources really get scarce they call it a crisis and
turn matters over to the politicians.
Factoid
Factor of Production
Failed State
Fallacy, Economic
Falling Rate of Profit
False Correlation
Federal Reserve System (the Fed)
Feudalism
FICA (Federal Insurance Contributions Act)
Fictitious Capital
Fictitious Costs
Fiduciary Responsibility
Finance Capitalism
Financial Engineering
Financialization
FIRE Sector
Fiscal Surplus (AKA Fiscal Drag)
Flat Tax
Forced Saving
Foreclosure
Fragility
Free Lunch
Free Market
Free Trade
Friedman, Milton (1912-2006)
Friedman, Milton (1912-2006)
Failed State: A nation whose government has been taken over by neoliberals
and/or kleptocratic oligarchy and its public domain privatized. Such economies
impose rent extraction and austerity to squeeze out more revenue for the FIRE
Sector. The resulting economic shrinkage forces governments to borrow from
bondholders, making them dependent on the financial cartel administered by the
IMF in support of the rentiers. (See Washington Consensus.) The ensuing
social chaos leads to a neofeudal economy. (See End of History and
Polarization.)
Federal Reserve System (the Fed): The U.S. central bank, established in 1913
(six years after the 1907 financial panic) to shift monetary authority from the
Treasury to the commercial banking system, and to rescue banks with public
bailout money (euphemized as “more flexible credit”) to maintain the solvency
of debtors and the banks to which they owe money.1 As long as central banks are
run by and for commercial banks (see To Big to Fail/Jail), they will limit this
money-creating power to helping creditors, imposing fiscal austerity instead of
saving the economy’s 99 Percent by financing real economic growth.
In the 1920s, Fed Chairman Benjamin Strong flooded the economy with low-
interest credit to encourage U.S. lending to German cities and other borrowers.
The indirect aid was to provide Germany’s central bank with enough hard
currency to pay its reparation debt to the Allies. This enabled England and other
Allies to turn around and pay their World War I arms debts to the United States.
This easy-money (that is, easy-debt) policy fueled a domestic U.S. financial and
stock market bubble, leading in due course to the 1929 crash and subsequent
1931 write-down of German reparations and Allied debts.
In 1951 the Fed reached an Accord with the Treasury to settle the implicit
conflict of interest between the government, seeking to borrow at the lowest
possible interest rate – and banks, which wanted high rates (euphemized as
“fighting inflation”). Bank lending was deregulated under Alan Greenspan’s
Chairmanship (1987-2006), fueling a financial bubble that gained momentum
after 1992, flooding the economy with low-interest mortgage credit after 2001 to
inflate the real estate bubble. (See Ponzi Scheme.)
When junk mortgages collapsed in 2008, the Federal Reserve provided the
leading banks with over $4 trillion of low-interest reserves at only 0.1% interest
(a tenth of one percent) to help them recover. The aim was to re-inflate prices for
real estate and other assets, saving bank balance sheets from negative equity.
This episode illustrates how central banks can create money electronically
without causing consumer price inflation rather than taxing populations to pay
for government budget deficits. (See Modern Monetary Theory.)
Fictitious Capital: By the late 19th century the term “fictitious” or “fictive”
capital was used across the political spectrum from Karl Marx to Henry George
to describe debt claims and property privileges (“rights”) that have no real cost
of production (value), except for payments to lawyers and politicians to obtain
special privileges to siphon off a flow of rentier payments.
What ultimately makes such claims for payment fictitious is the inability of
tangible capital investment or real wages to keep pace with what is owed or
demanded. A typical view was voiced in the 1920s by the banker Paul Warburg:
“The world lives in a fool’s paradise based upon fictitious wealth, rash promises,
and mad illusions. We must beware of booms based on false prosperity which
has its roots in inflated credits and prices.”2
Frederick Soddy (1877-1956) called such financial claims virtual wealth,
because they are claims on “real” wealth and income.3 But there is nothing
fictitious about the corrosive real-world effect of financial and other rentier
claims. Creditors gain legal priority over tangible property ownership when
bankruptcy proceedings and foreclosures transfer real estate and industrial
companies to them. Wealth obtained in this way enables financial interests to
gain control of government and its lawmaking power, public enterprise and
infrastructure. As a result, financialized economies are characterized by asset
prices bid up relative to the price of labor (real wages) by debt leveraging and
extractive rent seeking.
Rising asset prices for real estate, stocks and bonds may give an illusion of
growth (see Bubble and Great Moderation), but must give way to debt
deflation, euphemized as “secular stagnation” to avoid placing the blame
specifically on the financial sector and the economic fictions it sponsors. Yet
today’s anti-classical reaction has led the term “fictitious capital” to all but
disappear from usage.
Fictitious Costs: Charges over and above wages and normal business profits.
(See Economic Rent.) The main examples are interest on debt to leverage one’s
investment (e.g. on corporate buyouts), stock options, management and
underwriting fees, and the watered stock printed and given to cronies and
political insiders by railroad barons and emperors of finance around the turn of
the 20th century.
Fig.5
Finance capitalism is defined by the relationship between creditors and debtors,
and speculation for financial gains not related to tangible capital investment or
production. The aim is to extract interest and financial fees by indebting labor,
industry, real estate and government. Mortgage bankers aim to absorb all the net
rental cash flow (ebitda).
The culmination of this dynamic is the point at which the expanding debt
overhead siphons off all net discretionary personal income and business profits.
For loans to governments, the aim is to absorb the net tax revenue, and then to
strip away the public domain in payment (e.g., as in Eurozone loans to Greece
since 2010).
To increase its gains, the financial sector promotes (indeed, demands) the
creation of legal monopolies and privatization of land ownership and public
infrastructure, to be sold on credit. This builds interest charges into the break-
even cost of doing business, increasing the economy’s overall cost structure. In
the Bubble stage of finance capitalism, the measure of financial productivity is
total returns: interest plus capital gains. These gains on stocks and bonds are
engineered by debt leveraging. Homebuyers, real estate speculators and
corporate raiders pay their current income as interest, hoping that prices for
assets bought on credit will rise at a faster rate.
These gains appear to be “saving” with interest being paid for expectations
of capital gains. (See Ponzi Scheme.) This economic and political dynamic of
finance capitalism following feudalism and industrial capitalism (see chart
above), ends in debt peonage and a plunge of asset prices as the economy
succumbs to debt deflation. The effect is a kind of neofeudalism.
FIRE Sector: An acronym for the symbiosis of Finance, Insurance and Real
Estate. This sector comprises the banking, property and debt superstructure that
is wrapped around the production-and-consumption economy (see Two
Economies). It accounts for most of the economy’s unearned income, “capital”
gains from asset-price inflation, and in due course debt deflation.
Much of the ostensible value added by property rights, credit and insurance
merely add overhead charges. As Bertrand Russell noted already in 1934:
“Every improvement in industry, every increase in population of cities,
automatically augments what the landowner can exact in the form of rent. While
others work, he remains idle; but their work enables him to grow richer and
richer.
Land, however is by no means the only form of monopoly. The owners of
capital, collectively, are monopolists as against borrowers; that is why they are
able to charge interests. The control of credit is a form of monopoly quite as
important as land. Those who control credit can encourage or ruin a business as
their judgment may direct they can within limits, decide whether industry in
general is to be prosperous or depressed. This power they owe to monopoly.
The men who have most economic power in the modern world derive it from
land, minerals and credit, in combination.”5
Instead of producing a real product, the FIRE sector extracts transfer
payments from the economy in the form of rent, interest and dividends. (See
Rentier.) Most consumer price inflation is caused by the FIRE sector, led by
housing (rising rents and/or mortgage debt service), healthcare costs (insurance
fees and rising costs, including monopoly products such as pharmaceuticals) and
bank debt (including student loans, which have made education part of the FIRE
sector).
The effect is to raise prices above the costs that would characterize socialist
economies. For these reasons the FIRE sector should be treated as a subtrahend
from Gross Domestic Product (GDP; see NIPA). It does not produce real output,
but is an extractive zero-sum activity. This perception is blurred by FIRE sector
lobbyists using part of that sector’s gains to sponsor neoliberal deregulatory
policy and deception to dull public opposition to the sector’s rising overhead
burden.
Flat Tax: The antithesis of progressive income taxation, it reduces taxes on the
wealthy by pretending that it is equitable for everyone to pay the same
percentage, from billionaires to their cleaning ladies. First imposed by
neoliberals on Russia and other post-Soviet states, it is the oligarchic dream
policy to widen economic inequality in the United States and other financialized
countries. The aim of U.S. Republicans, such as would-be presidential candidate
Steve Forbes in 1996 and 2000, has been to exempt “capital” gains altogether,
and to maintain tax loopholes for other financial returns.
Forced Saving: Since 1982, U.S. wage withholding has been steeply increased
to prepay Social Security and medical insurance instead of managing these
programs (and pensions) on a pay-as-you-go basis as in Germany. (See Labor
Capitalism and Sinking Fund.) The FICA program’s fiscal surplus enabled the
Republican Congress to cut taxes for the higher income brackets. Making it a
user fee instead of funding it out of the overall budget via progressive taxation
makes this forced saving part of a tax shift benefiting the wealthy. And saving
for pensions – prepaying for retirement – became a major factor pushing up
stock market prices. (See Pension-fund Capitalism and Financialization.)
Free Lunch: A popular term for economic rent, transfer payments or prices that
have no counterpart in the actual or socially necessary costs of producing goods
or services. Most business ventures seek such free lunches not entailing actual
work or real production costs. To deter public regulation or higher taxation of
such rent seeking, recipients of free lunches have embraced Milton Friedman’s
claim that There Is No Such Thing As A Free Lunch (TINSTAAFL). (See also
Chicago School, Parasitism and Windfall.)
Even more aggressively, rent extractors accuse governments of taxing their
income to subsidize free loaders, pinning the label of “free lunchers” on public
welfare recipients, job programs and the beneficiaries of higher minimum wage
laws. The actual antidote to free lunches is to make governments strong enough
to tax economic rent and keep potential rent-extracting opportunities and natural
monopolies in the public domain.
Free Trade: The stage of trade policy that followed mercantilist and
protectionist success in raising first Britain and then the United States and
Germany to industrial and financial dominance. Pulling up the ladder, these
leading industrial nations demand that other countries open their markets to lead-
nation exports and investment instead of protecting, subsidizing and
modernizing their own industry and agriculture. Such “free trade” has become a
euphemism for centralizing industrial, agricultural and financial power in the
United States, while offshoring employment to the low-wage countries.
Academic rationalization of this kind of globalization is based on short-term
equilibrium theory that excludes consideration of how protectionist policies
may support capital investment to raise productivity over time. Also ignored are
“off balance sheet” costs borne by society to clean up environmental pollution
and global warming. For further discussion of protectionism, see my book
America’s Protectionist Takeoff: 1815-1914 (2010).
Government: From the Greek root cyber, meaning “to steer,” this social control
function historically has been provided by public institutions at least ostensibly
for the general welfare. Sovereign states are traditionally defined as having the
powers to levy taxes, make and enforce laws, and regulate the economy. These
planning functions are now in danger of passing to financial centers as
governments become captive of the vested interests. The FIRE sector and its
neoliberal supporters (see Chicago School and Free Market) seek to prevent
the public from regulating monopoly rent, and also aim to shift the tax burden
onto labor and industry. (See Big Government, Oligarchy, Postmodern
Economy and Tax Shift.) The recently proposed Trans-Pacific Partnership
(TPP) agreement and its European Counterpart, the Transatlantic Trade and
Investment Partnership (TTIP), would compel governments to relinquish these
powers to corporate lawyers and referees appointed by Wall Street, the City of
London, Frankfurt and other financial centers. (See Regulatory Capture.) The
non-governmental court would oblige governments to pay compensation fines
for enacting new taxes or applying environmental protection regulations or
penalties. The fines would reflect what companies would have been able to make
on rent extraction, pollution of the environmental and other behavior usually
coming under sovereign government regulations. Making governments buy these
rights by fully compensating mineral and other rent-extracting businesses would
effectively end the traditional role of the state. (See Neoliberalism.)
Grabitization: The Russian term for privatization after Boris Yeltsin dissolved
the Soviet Union in 1991 and accepted American advice to turn over existing
enterprises and natural resources to Red Directors and the banks they hastily
organized. Cold War neoliberals applauded this as a free market, recognizing
that the only way that the post-Soviet appropriators could turn their takings into
cash and keep it free from future taxes and clawbacks was to sell their shares to
U.S. and European buyers, holding most of their proceeds in London and other
hot-money centers.
The neoliberal cover story was that managers acting in their own interest
would make industry more productive than would be the case under state
ownership. In practice the result was asset stripping and insider dealing (see
Kleptocracy). The new factory owners stopped paying for employee benefits,
and went for long periods without paying employees at all. This turned Russia
and other post-Soviet economies into financially polarized oligarchies, with
much less progressive taxation than was applied in the West – typically a flat tax
that fell only on labor and consumers, not on property and financial income or
asset-price gains. Russian stocks listed on the New York and London exchanges
became the leading gainers leading up to the 1997 Russia-Asia financial crisis,
yet between 1990 and 2015 Russia suffered capital flight and losses of about $25
billion a year – over half a trillion dollars.
Great Moderation: Not originally meant to be a sarcastic term, this was the
Bubble Economy period of Alan Greenspan’s tenure at the Federal Reserve,
1987-2006. During these two decades the wealth and income of the One Percent
pulled far ahead of the 99 Percent as prices for real estate, stocks and bonds were
inflated on credit. (See Asset-Price Inflation.) While wealth soared at the top of
the economic pyramid, wages stagnated and GINI coefficients reached their
highest degree of polarization in a century. Greenspan deemed these gains
“moderate” because workers went so deeply into debt that they were afraid to
strike and complain about working conditions (the “traumatized worker
syndrome.”) Financial fraud flourished as bank lending was deregulated and
lenders inflated the junk-mortgage bubble (see NINJA Loans). Banks lent
homeowners and other borrowers enough money to keep current on their debt
service. (See Ponzi Scheme.) The lending that financed asset-price inflation left
a residue of debt deflation, coupled with a tax shift onto wage earners that
“moderated” the rise in consumer prices.
Greed: “All for ourselves and nothing for other people, seems, in every age of
the world, to have been the vile maxim of the masters of mankind,” wrote Adam
Smith (Wealth of Nations, Book III, Ch. 3). Yet subsequent mainstream
economics has shied away from confronting the dynamics of greed. The supply
and demand curves of late 19th-century utility theory were based on the
hypothesis of diminishing marginal utility: The more food, clothes or other
consumption goods one has, the less pleasure each additional unit gives. If
money and property were like bananas and other food, this would mean that
instead of the One Percent tapering off their demand for wealth, they would
become satiated, leaving the path open for less rich individuals to catch up. But
as the ancients knew, the principle of diminishing marginal utility does not apply
to money and property. The more one has, the more one wants. Wealth is
addictive, sucking its possessors into a compulsion to accumulate. Gilded Age
economists ignored the seemingly obvious tendency for wealthy people to strive
to increase their fortunes in ways that injure the economy. (See Affluenza,
Hubris, Wealth Addiction and Zero-Sum Activity.) The proper task of
democratic and fair societies is to keep this compulsive acquisitiveness in check.
Low-surplus economies dependent on mutual aid tend to have peer pressure
sanctions against the accumulation of money or other personal wealth, especially
where the main way of obtaining it is at someone else’s expense. Such
communities need to maintain a self-supporting population, if only for military
defensive purposes. Disenfranchising citizens would mean fewer army members,
leaving the community more prone to being conquered by rivals. For example,
only as the Roman world grew rich enough to hire mercenaries was it possible
for restraints on greed to be loosened to indebt and disenfranchise the citizen
armies.
Greenspan, Alan (1926-): A follower of Ayn Rand, the Austrian School and the
Chicago School, he said that he didn’t believe the financial sector would risk its
reputation by behaving in an unethical way – as if its bubble economy fortunes
did not stem largely from fraud and deception. As Federal Reserve Chairman
(1987-2006), he blocked the central bank from stopping the junk-mortgage
bubble’s pervasive fraud.
Describing the “traumatized worker syndrome,” Greenspan explained why
wages remained stagnant despite the remarkable rise in labor productivity and
money creation. Workers had become so deeply indebted with such large
monthly carrying charges that missing a credit card or public utility payment
would bump up interest charges to around 29% penalty rates, while missing a
mortgage payment would endanger their home ownership. As a result, workers
were afraid to strike or even to risk being fired by complaining about low wages
or abusive working conditions.
Groundrent: The portion of rent paid to hereditary owners for use of a specific
site. After the Norman Invasion of 1066, England’s landlords charged
groundrent in the form of leases. This is separate from what the property users
pay for buildings or other capital improvements.2 (See Adam Smith, Economic
Rent, Henry George and John Locke.) Over and above statutory hereditary
groundrent is the land rent set by the market – mainly in the most urbanized or
commercial areas. Most such urban land rent today is created by public
infrastructure investment, amenities and prestige creation. In high-status
neighborhoods with good transportation, schooling and communications, this
site rent-of-location reflects public infrastructure investment and the general
level of prosperity. (See Thorstein Veblen.) Such locations bear a property tax
that should be basically a user fee to reimburse the public sector for its
contribution to site valuation. But today’s property taxes only capture a small
portion of the full land rent.
The full rent-of-location thus stems not only from nature (such as soil
fertility), but also reflects the infrastructure services provided by society.
Privatization of rent thus appropriates not only nature but also the value of
public investment and overall prosperity. The real estate market determines the
level of land rent over and above the landlord’s capital investment in buildings
and kindred improvements.
H
is for
Hyperinflation
Half-life
Have-nots
Haves
Henry George Theorem
Host Economy
Hubris
Hudson Bubble Model
Hyperinflation
Hypocognizant
Half-life: In physics, the time it takes for half the mass of a radioactive element
to decay into the next-lower isotope or element, typically ending in stable and
inert element such as lead. By analogy, the time it takes for an economic theory
or ideology to lose half its influence, e.g., as Karl Marx’s value theory (50
years), Henry George’s Single Tax (15-20 years), John Maynard Keynes
multiplier theory (40 years), Milton Friedman’s Chicago School monetarist
theory (20 years) and, most recently, neoliberalism (which hopes to last forever
as the End Of History).
Have-nots: People who have debts instead of wealth. (See Debt Peonage and
Neo-Serfdom.)
Haves: The One Percent that holds the 99 Percent as debt hostages, while aiming
to monopolize the rise in income and wealth. (See Affluence and Oligarchy.)
Henry George Theorem: A term coined in 1977 by Joseph Stiglitz for the
principle that public spending on roads and other transportation, parks, schools
and other basic infrastructure increases local rent-of-location and hence property
valuations by at least an equal amount.1 The theorem is named after Henry
George, apparently for his claim that a Single Tax on the rental value of land
would be enough to defray public expenses for basic needs. But these two
phenomena are not the same thing.
In London it cost £3.4 billion to extend the Jubilee tube line to the Canary
Wharf financial district – while raising the valuation of land along the route by
over £10 billion. Taxpayers bore the cost, but “land owners contributed nothing
towards the increased value that accrued to their assets.”2 The entire cost of
public construction could have been defrayed out of site taxes on the land’s
increased valuation. (See Economic Rent and Groundrent.) This would have
been preferable to taxing wage income and profits.
Heinrich von Thünen earlier had attributed land prices mainly to location,
in contrast to Ricardian soil fertility. But the site value for location is largely a
result of public amenities – in addition to transportation, the proximity to
schools, parks, public institutions, communication, visual landscaping, access to
water and so forth. Neither von Thünen nor George related rental value
explicitly to public infrastructure investment. George attributed the rising price
of land simply to its increasing scarcity in the face of population growth.
Thorstein Veblen made the point that urban politics and civic improvements
were mainly concerned with projects to promote real estate by land speculators.
The “law” thus would better be called the Thorstein Veblen theorem – except
that from the vantage point of the financial and real estate sectors that dominate
American politics, the aim of public infrastructure spending is indeed to increase
land prices. But real estate developers and their pet politicians try to keep all the
land-price gains for themselves, not for the public purse to tax these asset-price
gains.
Stiglitz evidently found it more innocuous to cite George as intellectually
non-threatening, although George’s proposals went further than Stiglitz’s term
suggests. George’s early writings urged that basic infrastructure such as railroads
and even banking be kept in the public domain. But after becoming a libertarian
politician, George differentiated himself from socialists by opposing strong
government. Neither his followers nor Stiglitz’s neoclassical mainstream school
took the trouble to calculate just how large land rents were, or the degree to
which they rose as a result of public investment as distinct from general
prosperity, bank credit or “nature.” Such a calculation would make the fairness
of taxing the full rent of location that public spending creates all too obvious.
Veblen’s analysis of country towns applies equally well to specific
neighborhoods:
“The location of any given town has commonly been determined by collusion
between ‘interested parties’ with a view to speculation in real estate, and it
continues through its life-history (hitherto) to be managed as a real estate
‘proposition.’ Its municipal affairs, its civic pride, its community interest,
converge upon its real-estate values, which are invariably of a speculative
character, and which all its loyal citizens are intent on ‘booming’ and ‘boosting,’
– that is to say, lifting still farther off the level of actual ground-values as
measured by the uses to which the ground is turned. Seldom do the current
(speculative) values of the town’s real estate exceed the use-value of it by less
than 100 per cent.; and never do they exceed the actual values by less than 200
per cent., as shown by the estimates of the tax assessor; nor do the loyal citizens
ever cease their endeavours to lift the speculative values to something still
farther out of touch with the material facts. A country town which does not
answer to these specifications is ‘a dead one,’ one that has failed to ‘make good,’
and need not be counted with, except as a warning to the unwary ‘boomer.’”3
Veblen was too trenchant a critic of neoliberal economics to be safely
acknowledged by today’ mainstream. His focus on land prices went beyond
merely capitalizing (financializing) current rents into mortgage loans,
emphasizing real estate sales promotion and advertising.
Any theorem purporting to relate rising land prices to tax policy and public
infrastructure thus must look at the overall economy as a system centered on
banking and the real estate sector. Banks, for instance, provide the mortgage
credit that enables new buyers to bid up real estate prices. The rule of thumb is
that rent is for paying interest, which tends to capitalize the rising rental value.
So banks end up with the main benefits of land-price gains resulting from public
investment.
The aim of politicians orchestrating these price gains is to leave them in
private hands, keeping local governments from recapturing the gains that their
infrastructure investment creates. My own version of the relevant “theorem” is
therefore that increases in public infrastructure expenditures raise land prices by
the extent to which the increased rental site-value is capitalized into bank loans.
The aim is for further such debt-leveraged “capital” gains.
Host Economy: A nation that lets its land, natural resources, public
infrastructure and industrial production be privatized, especially by foreign
investors (financed with foreign bank loans) in alliance with client oligarchies. I
elaborate the extractive character of such intrusion in my book, Killing The
Host: How Financial Parasites and Debt Destroy the Global Economy (2015).
Hudson Bubble Model: I describe how bubbles evolve from the asset-price
inflation stage to debt deflation later in this book. For the basic concepts see
Bubble, Compound Interest and Economic Forecasting.
Ideology: A moral perspective on how the world works, with a set of values
promoting either acceptance or rejection and reform of how society is organized
and what is fair.
As sponsored by the vested interests, the mainstream ideological frame of
reference is defensive of the status quo. Its beneficiaries tend to view society as
limited to “the market,” defined as the existing pattern of supply and demand,
asset ownership and debt relationships. The intent is to create a mindset in which
debtors and labor will feel responsible for their economic condition (see Blame
the Victim) and see their powerlessness as the result of natural law. The existing
order is depicted as a product of natural selection, and hence is the best of all
possible worlds. Conversely, this ideology characterizes public regulation to
make economies more equitable as inefficient and hence burdensome, and even
as the road to serfdom.
“Free market” ideology (an example of what Antonio Gramsci called
cultural hegemony) depicts the One Percent as earning their economic rent and
“capital” gains by creating jobs and promoting the well-being of their employees
and customers (the 99 Percent). Predatory activities are treated as anomalies to
the customary pretense that most fortunes are made by adding to social well-
being, not exploitation, insider dealing and fraud. Neoliberal trickle-down
economists portray the One Percent as investing profits in new tangible capital
formation to raise productivity and output. The policy conclusion is to untax and
deregulate the wealthy, on the assumption (not empirically verified) that they
will use their income and wealth to raise output and living standards.
Individualists go so far as to argue that there is no such thing as society (see
Margaret Thatcher and Clash of Civilizations). The inference is that the 99
Percent deserve no support from government, but must pay out of pocket for
consumer safety protection, public education and health care, and indeed for
most infrastructure. Checks and balances to regulate the potentially predatory
activities of the One Percent are accused of adding to economic overhead and
hence to the prices that consumers must pay, not as preventing monopoly prices
and rent extraction.
Socialist ideology opposes these dynamics by advocating more productive,
sustainable and fair economic relations. This requires demonstrating how
ideology tends to reflect class interests. Unrealistic assumptions and tunnel
vision rarely gain widespread popularity without sponsorship. Some interest
group is almost always eager to elaborate economic error as a self-serving
deception. Lobbyists for these special interests recruit useful idiot savants to
provide a rationale for deceptive economic logic – trickle-down economics, free
trade and free capital movements (i.e., capital flight), austerity, balanced budgets
or surpluses – as if society at large benefits instead of high finance and
monopolists.
Idiot Savant: A “learned idiot” with a quick mind but not much worldly
judgment. Many tunnel-visioned individuals are adept at mathematics or abstract
logic, but lack grounding in what to be smart about. (See Learned Ignorance.)
Client academics are the proverbial “useful idiots” defending the status quo, as
if any economy is in natural market equilibrium, with its inequality being an act
of nature, not the result of bad policy or debt deflation. Many of the economists
most applauded by the vested interests speculate by a priori axioms about a
world that might hypothetically exist, but lacks reference to current reality or
history. They depict the status quo as a naturally fair and equitable product of the
struggle for existence, implying that we live in the best (or at least the most
inevitable) of all possible worlds. (See Austrian School, Chicago School and
Neoliberal.) Ignorance: Socrates argued that the ultimate source of evil was
ignorance, because nobody knowingly commits evil. But the financial and
property sector willingly acts (often with violence) to pursue its own narrow
interests, destroying the social organism as collateral damage in its greed. (See
Affluenza.) Promoting ignorance as a means of disabling popular opposition to
financial interests and monopolists is the essence of evil. Predatory corporate
practice has become a combination of the Ken Lay “Enron” defense of executive
ignorance (Lay claimed that he didn’t know what was going on) and the
Nuremburg defense by subordinates (“We were only following orders”).1
Such assertions of ignorance (see Denial) almost always are lies, as when
individuals who are accused in court answer every incriminating question with,
“I do not recall.” The reality is that chief executives are paid millions of dollars
in salaries and tens of millions of dollars in bonuses and stock options precisely
to know what is going on. Yet when fraud is discovered, they pretend that they
were fooled by scheming subordinates. (See Client Academic, Idiot Savant and
Learned Ignorance.) Their companies pay the civil fines while the executives
are allowed to keep their accumulated takings – bonuses and stock options.
Imperialism: The first and most brutal form of imperialism was military
conquest. The object was to seize land and natural resources. The next step was
to tax the population and extract land rent, turning the conquered territory into a
colony, raising money to pay by producing exports desired at home – especially
raw materials. Britain’s colonial system is the classic example. It aimed to
achieve imperial self-sufficiency in raw materials and money, while making
colonies and other countries dependent on the resources it provided.
But empire building costs money, and colonialism implies war. Wars drain
gold, and force mother-country governments into debt to bondholders – who
traditionally have sought to convert their loans into monopoly privileges. Britain
created the East India Company and other monopolies to sell to Dutch investors
and other holders of their gilt Exchequer bonds. So colonialism’s military
overhead ends up making imperial countries financially dependent on a global
cosmopolitan class.
Modern imperialism is largely financial. Armies are no longer needed to
appropriate foreign real estate, natural resources or public infrastructure.
Financial dependency makes debtor countries subject to IMF and World Bank
“conditionalities” imposing austerity that forces them to pay creditors by selling
off their public domain.2 This transfers assets to the United States and other
creditor powers, while avoiding overt colonialism’s expensive military overhead.
U.S. diplomats seek to consolidate American financial power by sharing
gains with local client oligarchies that remain in the dollarized financial system
and adopt neoliberal Washington Consensus policies. Pinochet-style “regime
change” is mounted against countries that try to protect their political and
financial independence by creating or joining rival currency blocs and banking
systems (e.g., Libya and Syria). But like militarized colonialism, monetary
imperialism tends to overplay its hand. When U.S. strategists imposed trade and
financial sanctions against Russia and Iran to block their steps toward monetary
autonomy, the effect was to drive them together with China and other BRICS
countries to break free by creating their own trading and currency clearing area.
(See Independence.) Implanted Memory: A false memory of the past, a
factoid implanted to manipulate public opinion. Germans are told that their
hyperinflation of the 1920s resulted from their central bank’s money creation to
finance budget deficits, as if this resulted from domestic spending rather than
paying the reparations that collapsed the currency. Germany’s post-1948
Economic Miracle is attributed to free market policies, not to the Clean Slate that
cancelled domestic debts or the 1953 writedown of its foreign debt. Historical
reality is replaced with a false fiscal and financial mythology popularized by
“hard money” creditor interests.
Insanity: Following the same policy repeatedly, believing or hoping that next
time the outcome will be different. In economics, pursuing austerity programs in
the belief that they will provide more tax revenue and growth out of debt, despite
the reality of widening budget deficits and shrinking economies leading to yet
more debt defaults.
While victims of neoliberalism and the Washington Consensus thus suffer
from repetition compulsion, the authors of austerity – bondholders and the One
Percent – are not really insane, unless we count greed and affluenza as forms of
insanity. They simply have wrapped their self-serving austerity doctrine in a
persuasive propaganda imagery of “as if” junk economics.
Interest, mortgage: Mortgages account for 70% to 80% of bank loans, and
hence for most interest charges in the U.S. economy. Debt service on this
lending absorbs most of the land’s site rent and otherwise taxable profits for
commercial real estate, leaving only the property tax available for the tax
collector. In the United States and many other countries, that tax is only 1% or
less – far below the amount of interest that is paid on the property.
To avoid paying income tax (thus leaving more rental income available to
pay bankers as interest), absentee real estate owners are allowed to claim “book
losses” by pretending that their buildings depreciate and hence lose value (see
Over-depreciation). Real estate investors can use this fictitious loss to offset
income taxes on revenue from their other operations. Coupled with the tax-
deductibility of mortgage interest, these special loopholes push the tax burden
onto labor via higher sales taxes and income taxes.
Invisible Hand: The term dates back to Adam Smith’s Theory of Moral
Sentiments (1759) postulating that the world is organized in a way that leads
individuals to increase overall prosperity by seeking their own self-interest. But
by the time he wrote The Wealth of Nations in 1776, he described hereditary
land ownership, monopolies and kindred rent seeking as being incompatible with
such balance. He pointed to another kind of invisible hand (without naming it as
such): insider dealing and conspiracy against the commonweal occurs when
businessmen get together and conspire against the public good by seeking
monopoly power. Today they get together to extract favors, privatization
giveaways and special subsidies from government.
Special interests usually work most effectively when unseen, so we are
brought back to the quip from the poet Baudelaire: “The devil wins at the point
he convinces people that he doesn’t exist.” This is especially true of the financial
reins of control. Financial wealth long was called “invisible,” in contrast to
“visible” landed property. Operating on the principle that what is not seen will
not be taxed or regulated, real estate interests have blocked government attempts
to collect and publish statistics on property values. Britain has not conducted a
land census since 1872. Landlords “reaping where they have not sown” have
sought to make their rent seeking invisible to economic statisticians.
Mainstream orthodoxy averts its eyes from land, and also from monopolies,
conflating them with “capital” in general, despite the fact that their income takes
the form of (unearned) rent rather than profit as generally understood.
Having wrapped a cloak of invisibility around rent extraction as the favored
vehicle for debt creation and what passes for investment, the Chicago School
promotes “rational markets” theory, as if market prices (their version of Adam
Smith’s theological Deism) reflect true intrinsic value at any moment of time –
assuming no deception, parasitism or fraud such as characterize today’s largest
economic spheres (see FIRE Sector).
“It’s not what you make, it’s what you net”: Nominal after-tax wages are
termed disposable personal income (DPI) in official statistics, but this measure
does not really leave wage earners with much to spend on goods and services
after paying their monthly “nut” for housing, debt service, public utilities,
transportation, and compulsory health care or pension plan contributions. By far
the largest portion of wage income is passed on to the FIRE sector, not being
freely available for discretionary spending. (See “Hudson Economic Model”
later in this book.)
J
is for
Junk Bonds, Junk Economics and Junk Mortgages
Jubilee Year Junk Bonds Junk Economics Junk Mortgage Just Price
Junk Mortgage: A bank loan to a subprime borrower without regard for the
ability to pay (see NINJA Loans), typically with “exploding” interest rates that
rise sharply after three years. Federal Reserve Chairman Alan Greenspan
recommended such loans to consumers on the factoid that the average American
family moves every three years, and therefore would be able to sell their homes
(making a price gain in the process) before the higher interest rates came into
effect.
Homeowners who stayed in place, Chairman Greenspan suggested, could
refinance their mortgages by borrowing even more as the real estate bubble
continued its seemingly ad infinitum upward trajectory. He also assured people
that there was no national real estate bubble, only localized problems. To back
this falsehood he stifled pressure from within the Federal Reserve Board by Ed
Gramlich (a then-governor of the Federal Reserve who died in 2007) to clamp
down on rampant junk mortgage fraud.3 The resulting wave of junk mortgages
was the immediate cause bringing down the U.S. and European economies in
2008.
Just Price: Anticipating a line of analysis that would become the labor theory
of value, Church theologians in the 13th century listed the elements of income
that were morally justified. It was deemed moral for bankers and merchants to
earn enough to support their families in the normal style appropriate to their
status, but not to charge such extortionate rates as to live extravagantly. Bankers
were allowed to charge agio fees to compensate for risks such as non-payment
and other loss of their money. The concept of interest reflected their shared risk
with debtors regarding mutual gain in commercial enterprise, mainly foreign
trade and what was, in effect, a mode of shipping insurance. The focus was on
the socially necessary costs of providing banking services.
K
is for
Kleptocrat
Keynes, John Maynard (1883-1946): In the 1920s, Keynes became the major
critic of World War I’s legacy of German reparations and Inter-Ally debts.
Against the monetarist ideology that prices and incomes in debtor countries
would fall by enough to enable them to pay virtually any given level of debt,
Keynes explained that there were structural limits to the ability to pay. Accusing
Europe’s reparations and arms debts of exceeding these limits, Keynes provided
the logic for writing down debts. His logic controverted the “hard money”
austerity of Jacques Rueff and Bertil Ohlin, who claimed that all debts could be
paid by squeezing a tax surplus out of the economy (mainly from labor).
Modern Germany has embraced this right-wing monetarist doctrine. Even in
the 1920s, all its major political parties strived to pay the unpayably high foreign
debt, bringing about economic and political collapse. The power of “sanctity of
debt” morality proved stronger than the logic of Keynes and other economic
realists.
In 1936, as the Great Depression spread throughout the world, Keynes’s
General Theory of Employment, Interest and Prices pointed out that Say’s Law
had ceased to operate. Wages and profits were not being spent on new capital
formation or employing labor, but were hoarded as savings. Keynes viewed
saving simply as non-spending on goods and services, not as being used to pay
down debts or lent out to increase the economy’s debt overhead. (Banks had
stopped lending in the 1930s.) He also did not address the tendency for debts to
grow exponentially in excess of the economy’s ability to carry the debt
overhead.
It was left to Irving Fischer to address debt deflation, pointing to how debtors
“saved” by paying down debts they had earlier run up. And it was mainly fringe
groups such as Technocracy Inc. that emphasized the tendency for debts to grow
exponentially in chronic excess of the economy’s ability to carry its financial
overhead. Emphasis on debt has been left mainly to post-Keynesians, headed by
Hyman Minsky and his successors such as Steve Keen and Modern Monetary
Theory (MMT), grounded in Keynes’s explanation of money and credit as debt
in his Treatise on Money (1930).
Labor Capitalism Labor Theory of Value Laffer Curve Laissez Faire Land
Landlord Land Rent contrasted to Monopoly Rent: See Monopoly Rent
contrasted to Land Rent Land Value Tax (LVT, AKA Land Valuation
Tax) Law of Unintended Consequences Learned Ignorance Liberal Liberal
Democracy: See End Of History Libertarian Liberty Bell Liquidate
Liquidity Liquidity Trap Lobbyist Locke, John (1632-1704
Laissez Faire: Coined by the French Physiocrats, Laissez faire meant “let us
be,” free from the royal taxes shifted onto labor and industry. The Physiocratic
alternative was the Single Tax (L’Impôt Unique) falling on the land held by
France’s hereditary aristocracy and royal family. Adam Smith advocated such a
tax on Britain’s (absentee) landlords, and subsequent economists extended it to
include rentier income in general.
Today’s right-wing libertarians have reversed this original idea of laissez
faire to mean freeing the rentier class from taxes. This shifts the fiscal burden
onto labor and consumers – the reverse of what the Physiocrats, Adam Smith
and other classical economists meant. Libertarian anthropologists draw pictures
of a mythical age in which no public sector existed with no palace or temples to
regulate economies and levy taxes or fees for basic public services. Such junk
archaeology about a “natural” or “primordial” society provides a faux-historical
rationalization for junk economics.
Land: Physically, an area of soil or urban site. But ownership of land rights to
its crop surplus or other rental yield is a social construct, not a function of
nature. Economically, land is a property right (see Privilege).
Such rights originated in a communalist context in the Neolithic when land
was the primordial source of subsistence. It was the source of the community’s
surplus labor, initially corvée labor supplied by citizens. Land tenure rights were
granted to clan groupings in exchange for labor service on public works and for
serving in the army.1 Land rights were defined by this labor obligation reflecting
estimated crop yield or, in time, monetary tax-paying ability.
Down to the eve of the modern era, landholding was a precondition for
citizenship. Archaic land tenure initially was kept within clans, and was
transferred only with difficulty. After about 2000 BC in Babylonia, debt
foreclosure became the main means of “free” land acquisition. To do this,
creditors had to be adopted into the debtor’s family in order to obtain land upon
the debtor’s death in accordance with custom. But the new “outsider” owners
(creditors) sought to shift responsibility for the land’s corvée tax onto the former
heirs-become-renters.
In today’s economies, land is a vehicle for property claims to a site or natural
resource (including subsoil mineral rights). In agriculture the site consists of the
soil. In most real estate, “land” is the location’s area and zoning rights, which
play a role similar to that which fertility plays in determining the rent and market
price of agricultural land. (See Rent of Location.) By extension, the concept of
land may extend to water and even air rights as these become bought and sold,
creating legal chokepoints to access, enabling rent extractors to put tollbooths in
place. (See Privatization, Rent and Rent Theory.) Land ownership and its rent
today is no longer limited to citizens, and is freely transferable. But most buyers
require bank loans to obtain it. Land is worth whatever banks will lend against it
– and a rising proportion of rental value is absorbed by interest charges, leaving
a shrinking portion available to be paid in taxes. The effect of giving special tax
breaks to real estate owners reverses the original creation of land tenure to
reflect the land’s ability to yield taxes (originally paid in corvée labor and crops,
and in the obligation of landholders to serve in the army, as noted above). As
real estate has been financialized, land rent has passed out of the hands of the
public and of landholders, to mortgage lenders.
Landlord: The original term for the land’s conquerors. After the Norman
Conquest of Britain in 1066, the victors sanctified themselves (and hence their
heirs and subsequent owners) as lords of the land. Initially they owed its yield to
the king in the form of military and fiscal obligations. After the Revolt of the
Barons in the 13th century, the landed aristocracy privatized the land for
themselves, and levied groundrent on its occupants and users.
The term “landlord” now refers to real estate owners in general, of whom
Adam Smith said: “Landlords love to reap where they have not sown.” But since
land has become freely marketable, its rent is paid to the mortgage bankers
instead of to the tax collector, capitalizing (financializing) the rental income that
has been “freed” from taxes into mortgage interest payments. The more taxes are
cut, the more rental income is available to pay mortgage interest. In effect,
receipt of land rent has passed from the public sector to hereditary landed
aristocracies to mortgage bankers. (See Economic Rent.) Land Rent
contrasted to Monopoly Rent: See Monopoly Rent contrasted to Land Rent.
Land Value Tax (LVT, AKA Land Valuation Tax): A means of keeping
down mortgage debt (and hence, housing prices), by taxing the rental valuation
of land, so that it will not be available to be pledged as interest payments to
banks for mortgage loans. (See Groundrent, Rent and Rent Theory.) To
classical economists, land is provided by nature and hence has no cost of
production and hence no value as such (see Factors of Production). But it does
have a market price, reflecting mainly rent of location, largely from civic
improvements (see Commons and Public Domain), and the willingness of
banks to lend against it.
The higher the yearly tax charge is, the lower the land price becomes,
because less income is available to be capitalized (financialized) into a bank loan
and paid as mortgage debt service. (See Myth #15 and #16 in “The 22 Most
Pervasive Economic Myths of Our Time” later in this book.) A Land Valuation
Tax thus acts as a counterweight to mortgage debt – which is why banks oppose
property taxes, realizing that what is not paid to the tax collector can be paid to
themselves as interest. (See Henry George Theorem and the contrast between a
Single Tax and a Flat Tax.) Law of Unintended Consequences: The solution
to every problem tends to create new and unanticipated problems, whose
magnitude frequently exceeds that of the original problem. (See Inner
Contradiction.) However, the adverse consequences of many seeming failures,
especially debt bubbles and IMF austerity programs, are indeed intended,
although public relations handouts to the press assure the public that “nobody
could have foreseen” how bad these consequences would be. When special
interests gain and the economy suffers, the perpetrators always claim innocence
(see Innocent Fraud), on the ground that the austerity and breakdown were
unintended. But the emergency bailouts to the One Percent and emergency
privatization sell-offs demanded by IMF conditionalities are indeed put in place
well in advance! The “unintended” consequences are rarely innocent, although
idiot savants may be trotted out from the ranks of mainstream economists to
provide a cover story.
Liberal: From Latin liber, meaning “free.” Originally an advocate of free trade
or laissez faire (loosely, “leave us alone”) from government regulation. Britain’s
Liberal Party urged taxation of groundrent to free the economy from its post-
feudal landlord class. The aim was to create a classical free market economy,
although it left a rentier overhead paid to banking and financial interests and
monopolies.
As governments were democratized, especially in the United States, liberals
came to endorse welfare spending on behalf of the poor and disadvantaged, and
government intervention in general to provide basic infrastructure so that it
would not be monopolized in private hands. This led the term “liberal” to be
associated with big government programs, Pentagon Capitalism and a
salvationist military policy abroad. By the 1960s, liberal Vice President Hubert
Humphrey aggressively supported the war in Southeast Asia that led to budget
deficits and stagflation. By the early 21st century, liberalism came to depict the
United States as the world’s “indispensable nation,” entitled to install neoliberal
governments by force under R2P policy (“Responsibility to Protect” – a
euphemism for “responsibility to privatize”), not its Progressive Era democratic
roots.
Liberty Bell: America’s Liberty Bell is inscribed with a verse from Leviticus
25: “Proclaim liberty throughout all the land, and to the inhabitants thereof.” The
biblical Hebrew term translated as “liberty” was d’r’r (deror). This was a
cognate to Babylonian andurarum, used by rulers to annul the citizenry’s
personal and agrarian debts, liberate bondservants and restore self-support lands
to citizens who had forfeited them to foreclosing creditors or sold them under
duress. The imagery can be traced back to Hammurabi raising the “sacred torch”
to signal the royal Clean Slate proclamations that evolved into the Jubilee
Year, which Jesus announced in his first sermon (Luke 4) that he had come to
proclaim.
Liquidate: To destroy (by selling). Debtors are obliged to liquidate their assets
to pay their creditors. (See Privatization for the liquidation of the public domain
by indebted governments.) Corporate raiders make a killing by carving up
companies and liquidating their assets in corporate breakups.
Liquidity: The amount of credit that banks will extend against a given asset,
making it “liquid,” meaning saleable. The easier the credit terms, the more credit
banks create to capitalize (financialize) an asset’s income stream into a flow of
interest payments. As the supply of credit mounts up and banks seek new
markets, the range of assets that are liquid (that is, bankable) widens, at rising
prices.
Liquidity Trap: A term coined by John Maynard Keynes to describe how low
interest rates may not spur new investment in situations where markets are
shrinking (which he blamed on over-saving). In 2009-2015 the Federal Reserve
found the trap difficult to escape from, because the debt overhead was left in
place, shrinking markets. Quantitative Easing keeps interest rates low, but fails
to stimulate new investment as debt deflation spreads globally. (Japan suffered
the same problem after its own bubble crashed in 1990.) Failure to write down
debts (see Debt Forgiveness) makes it difficult to escape from the liquidity trap.
Lobbyist: Hired by special-interest groups to plead their case for tax favoritism,
subsidy and protection by government, lobbyists are the political counterparts to
client academics. (See Idiot Savant and Chicago School.) Their task is to
weave a web of economic deception, well described by Adam Smith (Wealth of
Nations, Book I, Ch. 11): “The proposal of any new law or regulation of
commerce which comes from [business], ought always to be listened to with
great precaution, and ought never to be adopted till after having been long and
carefully examined, not only with the most scrupulous, but with the most
suspicious attention. It comes from an order of men, whose interest is never
exactly the same with that of the public, who have generally an interest to
deceive and even to oppress the public …”
Market Bolshevism: The shock therapy (no real therapy, only shock) that
enabled Boris Yeltsin’s “family” of allied kleptocrats to seize power and
overrule the Duma parliament in ways reminiscent of Lenin’s Bolshevik coup in
1917. (See Grabitization.) Public utilities and natural monopolies were turned
over to insiders, who “cashed out” by selling their takings on the New York and
London stock exchanges. Subsequent economic advisor Sergei Glaziev noted the
lesson for Russia from this disastrous neoliberal experiment: “if the state does
not regulate the market, then the market is occupied by monopolies, speculators,
and God knows whom. The role of the state is to create the most advantageous
conditions for the increase in the investment and economic activity…. people
saying that the state should stay out of the economy are working in the interests
of those who want to control the market.”2 In other words, an oligarchic “free
market” is as centrally planned as a Keynesian or socialist economy, but its
objective is to financialize economic rent.
Marx, Karl (1818-1883): Marx was the last great classical political economist.
Embarking on a study of political economy after he earned a doctorate in
philosophy in 1841, his sense of political and economic justice led him to
participate as a radical journalist in Europe’s 1848 revolutions by the
bourgeoisie against royalty and the aristocracy. But he criticized the bourgeoisie
for stopping short of raising labor’s wages and improving working conditions.
Going beyond the mainstream economic reform movement that aimed primarily
at reducing the power of landlords and monopolists, he defined industrial profits
as being exploitative of wage labor, which he found to be the distinguishing
feature of industrial capitalism.
Commissioned by the International Communist League, Marx wrote the
Communist Manifesto with Frederick Engels, published in English in London in
February 1848. He defined the historical task of industrial capitalism to be to
maximize efficiency and free economies from the unnecessary costs (faux frais)
of production inherited from feudalism. That was the class war of his day, by the
industrial bourgeoisie against landlords and bankers who extracted groundrent
and interest at the expense of industrial profits. Marx said that a further political
revolution would be needed to socialize property ownership, freeing labor from
industrial capital. To outline the economic logic of implicit in this looming class
conflict, Marx defined profit in terms of the price markup at which capitalists
sell labor’s products over and above the wages they pay. He pointed out that
under the labor theory of value, “labor” has two types of cost: (1) the wages paid
by employers, and (2) the price at which its products are sold at a profit. Wage
labor does not receive the full value of its product, leaving it unable to buy what
it produces. Capitalists may use their profits to invest in new means of
production, but the system is prone to increasingly severe economic and
financial crises as a result of its internal contradictions.
This interpretation of the labor theory of value led the rentier and industrial
interests to reject the value, price and rent theory developed by Adam Smith,
David Ricardo and John Stuart Mill that led logically to Marx’s theories. In its
place, mainstream economics adopted marginal utility theory, Austrian School
individualism and the post-classical economics of John Bates Clark, which did
not recognize the phenomena of exploitation or unearned income. The interests
of industrialists, landlords and bankers found a common ground in turning what
had been political economy narrowed into “economics.”
Extending the scope of economic reform to the social and cultural sphere,
Marx described alienation as separating wage workers from their status as
human beings in control of their lives (see Choice), working conditions and
product, and also over their relationship with others and, collectively, over
society as the ultimate human product. To save labor from this fate, Marx
defined the aim of socialism as being to free labor from capital owned by the
property classes, and hence from the state that industrial capital was in the
process of prying away from the landed aristocracy. This fight would lead
ultimately to the communist ideal of abolishing the state as an exploitative
apparatus.3 Juxtaposing the class struggle to what was becoming the mainstream
trickle-down ideology of his day proclaiming a harmony of interests to exist
between labor and capital, Marx expanded the idea of equality of rights and
mutual aid beyond the nobility to include the hitherto excluded working class.
He viewed class consciousness at the bottom of the economic pyramid as aiming
to socialize the means of production (land, factories and public infrastructure)
and banking.
In Germany, the most advanced country at the time, this seemed likely to
occur democratically with the formation of the Social Democratic party. In
Britain, the Parliamentary Labor Party was organized, and other countries
developed similar parties to promote the interests of labor. But the vested
interests pushed back, from the Paris Commune in 1871 to the Pinkerton thugs in
America, using force and violence against attempts to fight for workers’ rights
and better working conditions.
Volume I of Capital: A Critique of Political Economy was published in
1867, but Volumes II and III were published by Frederick Engels from notes left
behind after Marx’s death. These latter two volumes (and also Marx’s
posthumous Theories of Surplus Value, his original draft notes for Capital), treat
interest-bearing debt as being independent of profit and growth rates, self-
multiplying according to the purely mathematical rules of compound interest.
But like nearly all economists of his era, Marx expected industrial capitalism to
bring banking out of its usurious medieval origins to finance capital investment.
Marx was optimistic in believing that financial, political and other social
institutions would evolve to reflect the most efficient mode of production. He
viewed the industrialization of banking as part of a broader economic
restructuring in which governments were to make a widening range of services
freely available, headed by public health, pensions, education and other
infrastructure services. Broadly called “socialism,” this strategy was widely
discussed as the likely future evolution of industrial capitalism. Yet more than
any other economist of his time, Marx showed (in Vol. III of Capital) that the
tendency of interest-bearing debt to grow exponentially led to financial crises.
These crises exacerbated the underlying inability of labor to buy the goods it
produced. (See Circular Flow and Say’s Law.) Since World War II the global
economy has lapsed into a financialized neo-rentier economy that neither Marx
nor his contemporaries were so pessimistic as to forecast.
Military Junta: A regime usually associated with client oligarchies that impose
neoliberal policies on countries that reject the Washington Consensus. From
the Greek “colonels” regime of 1967-74 to Chile under General Pinochet and
Hillary Clinton’s Honduran coup in 2009, these regimes use military force to
cope with IMF riots that result from austerity programs imposed by foreign
creditor, and to use police to prevent political alternatives from being enacted.
Mixed Economy: Every economy is mixed, with public and private sectors co-
existing like the DNA molecule’s intertwining spiral strands. (See Market
Economy.) Well-run societies need reciprocal checks and balances to avoid the
extremes either of public or private sectors, ranging from Stalinist Russia to
neoliberal regimes.
Historically, the basic elements of commercial enterprise – standardized
prices and accounting, interest-bearing debt and profit-sharing contracts – first
seem to have emerged in Bronze Age Mesopotamian temples and palaces
(especially for long-distance trade) and gradually diffused throughout the
economy at large. (See Accounting and Government.) Today’s public sectors
still play a supporting and regulatory role, providing legal and economic
infrastructure and military security for the private sector, and creating the money
supply.
Wealthy elites tend to gain ascendency via financial dynamics, which
typically take over governments as well as real estate and industry. An equally
predatory outcome may occur when bureaucracies seek their own self-interest by
controlling the flow of revenue and hence the economic surplus. This often leads
to insider dealing. In both cases an emerging kleptocracy creates an oligarchy.
Governments tend to be controlled by families at the top of the economic
pyramid – going all the way back to the chieftains’ households that dominated
Mesopotamia’s temples and palaces. No society in history seems to have resisted
this kind of polarization for long, although popular morality has almost always
called for such reforms, checks and balances.
Modern Monetary Theory (MMT): MMT views money and credit as a public
utility.8 (See Government and Money.) Money is a legal creation, not a
commodity like gold or silver. Creating it costs central banks or treasuries
virtually nothing (likewise for banks creating their own electronic credit).
Governments give money value by accepting it in payment of taxes and fees.
The folding money in peoples’ pockets is, technically, a government debt – but it
is a debt that is not expected to be repaid. That debt – on the liabilities side of the
government’s balance sheet – is an asset to money-holders. This money does not
necessarily to lead to inflation when labor and other resources are less than fully
employed. By contrast, most bank credit is created to finance the purchase of
real estate, stocks and bonds, and thus fuels asset-price inflation. That is a
major difference between public and private money creation. And just as
hydrocarbon fuels lead to environmental pollution and global warming, bank
credit to bid up asset prices leaves a residue of debt deflation in the economic
environment.
Banks promote a market for this debt creation by doing what other
advertisers do: They sing the praises of their product, as if running up more debt
(created electronically at almost no real cost to the bank) will make people richer
(e.g., by asset-price inflation) instead of leaving them more deeply indebted.
A major virtue of MMT is to dispel the illusion that all government spending
must come from taxpayers. Not a penny of the $4.3 trillion that the Federal
Reserve’s Quantitative Easing program has provided to Wall Street since 2008
came from taxpayers. Governments do (and should) create money by printing it
(or today, creating it electronically), over and above the collection of taxes.
Instead of only giving it to the banks at 0.1% interest, the Fed could just as easily
have created money to spend into the economy for public programs.
MMT urges central banks or treasuries to monetize budget deficits by
creating money to spend into the economy in this way. The government’s budget
deficit is (by definition) the private sector’s surplus. By contrast, running budget
surpluses (as the United States did for decades after the Civil War, and as it did
in the Clinton Administration in the late 1990s) sucks money out of the
economy, leading to fiscal drag. If public debt-money were to be repaid (by
running a fiscal surplus), it would be removed from circulation. That is why
budget surpluses are deflationary – and why balanced budgets fail to provide the
economy with the money needed to grow and to create jobs.
By not running deficits, the economy is obliged to rely on banks for the
money and credit it needs to grow. Banks charge interest for providing this
credit, leading to debt deflation. Neoliberals want to keep bank credit-money
privatized. To keep it as a monopoly, they seek to block governments from
creating money. Their aim is for governments to finance public spending only by
taxing the 99 Percent – which drains revenue from the economy – or by
borrowing from banks and bondholders at interest.
The popular illusion that all bank loans come from deposits and savings is
kept alive by journalists such as columnist Paul Krugman of the New York
Times despite the seemly obvious fact that since 2008 little new bank credit has
been supplied by depositors.9 MMT Economists know that commercial banks
can create money simply on their computers, by crediting the borrower’s account
when the customer signs an IOU for the debt. The basic “service” that banks
perform by their credit creation is to create debt, on which they charge interest.
(See Exponential Function and Compound Interest for the problems this
causes). Loans thus create deposits – while also creating debt. When banks
borrow reserves from the Federal Reserve (at just 0.1% interest), they then are
able to charge as much interest as they can get their customers to pay.
Money always has been a claim on some debtor – a liability either of
governments or banks. On the broadest plane, a holder of money has an implicit
claim on society at large – which is in effect a collective debtor to the money
holder. This private banker’s monopoly privilege of money creation can be
maintained – and bank profits maximized – as long as they can by preventing a
public bank from being created as a public utility to provide the economy with
less expensive (and better directed) credit. That is why financial lobbyists try to
convince the public that only private banks should create credit-money, instead
of governments creating public money by deficit spending.
Money: Modern governments create paper or electronic money and spend it into
the economy by running budget deficits. Paper currency is a government debt,
appearing on the liabilities side of the public balance sheet. (It can be a pure
token – “equity” or “net worth” money.) This money is a claim by its holder on
the government, which the government settles by accepting it as payment for
taxes or fees. Governments give value to this liability by accepting it for
payments. This willingness by governments to accept it is money’s defining
characteristic. The modern monetary base is government-backed IOUs,
including the paper money in one’s pocket. If the government were to pay off
this debt-money permanently, there would be no money except for what banks
create. The classic analysis is Georg Friedrich Knapp’s State Theory of Money
(Die Staattheorie des Geldes, 1904, translated into English in 1924).10
Bank money is a claim for payment by the bank, but is accepted by
government, which has granted banks the money-creating privilege. Both
government and bank money are assets to their holders, but a liability of
governments or banks. And in both cases, money’s main function is to
denominate debts – starting with tax obligations.
Ancient Mesopotamian palaces accepted grain as payment, so grain was
money, although obviously not a good means of paying for most transactions,
except at harvest time on the threshing floor. Most transactions were settled by
running up debts, most of which were to be paid when the harvest was in. Rulers
often began their reign by declaring a price schedule for grain or silver accepted
as payments to palace collectors. Grain and silver (and also copper and other
commodities) were assigned standardized price equivalencies to pay palaces and
temples. But a “hard” asset such as silver or gold has never been money as such,
unless governments establish its value as a commodity by accepting it as a
means of payment for taxes, public fees or tribute levied on conquered
populations.
Society outside of government usually follows the government’s lead in
adopting money that is acceptable as a vehicle to pay the public sector. That is
the essence of the State Theory of Money (sometimes called Chartalism). It
finds money first attested in ancient Mesopotamia before 2000 BC, long before
coinage was issued. Monetary silver, and later Greek and Roman coinage, was
minted by the temples in order to ensure honest purity and weight. (From
Babylonian literature through the Bible, private merchants were notorious for
counterfeiting and using false weights and measures.) Silver was a store of value
mainly saved in the temples, especially in Greece and Rome. It could be melted
down in emergencies such as paying mercenaries in war crises.
Today, little bank money is used to increase the means of production or
employment. Banks create their money as credit, mainly to buyers of real estate,
or for speculation in stocks and bonds, or to raid companies (see Debt
Leveraging). When bankers write loans on their computer keyboards, this
creates a counterpart deposit. Governments may or may not back the banks’
ability to pay their liabilities to depositors and bondholders when the market
price of assets and collateral in their loan portfolio falls below the level of
deposits and loans they back. (See Quantitative Easing.) Money’s early role as
a commodity or debt payment accepted by public institutions for taxes levied on
conquered populations as tribute or to pay soldiers finds its counterpart in
today’s world. Central bank reserves consist mainly of dollars in the form of
U.S. Treasury IOUs, mostly for American military spending abroad. To Europe
and other dollar-holding governments, their monetary base is a form of tribute
paid as “protection,” mainly from American displeasure and the ever-present
threat of “regime-change.”
Money Manager: Investment banks, mutual funds, pension funds and insurance
companies that charge commissions for managing (or mismanaging) society’s
savings, organizing mergers and acquisitions (including corporate raids financed
by debt leveraging) and privatizing public enterprises. (See Casino Capitalism
and Labor Capitalism.) The common aim of money managers is privatization
across the board: money and finance, pension plans, insurance and the health
care that seemed on their way to becoming public functions a century ago.
Money managers are now seeking a bonanza of fees from privatizing Social
Security’s compulsory saving. This would steer funds into the stock market,
producing asset-price gains, much as pension fund capitalism did after the
1950s. The money manager’s objective is to obtain as much of the clients’ return
as possible in commissions and fees, leaving pension contributors with only a
portion of the returns – and with the losses when asset prices decline. An
ultimate stock price decline is likely to occur as the population ages and stocks
are sold to pay their pensions. Retirees will pull more funds out of the financial
markets than new employees are contributing. But by this time, money managers
will have taken their commissions and run.
Monopoly Rent contrasted to Land Rent: Both these forms of economic rent
represent income that does not reimburse a corresponding cost of production.
Land rent is a legacy of medieval conquest of the land by warlord aristocracies,
who appropriated the taxable crop surplus for themselves as government’s
ability to tax this surplus weakened. Monopoly rent emerged via a similar
privatization of essential services, with privileges created to pay international
creditors instead of warlords. Governments created trading monopolies (such as
the East and West India Companies and South Sea Company) to sell to
bondholders to reduce royal war debts. Governments also granted colonization
privileges, trading privileges and patents as a means of reducing their royal or
public debt.
Today, monopoly rent is the main objective of privatization, and is forced
mainly on deeply indebted countries. In Greece, the IMF and European Central
Bank (ECB) demanded $50 billion in privatizations to pay for the bailout of
bondholders in 2010 and 2012 (which finds its counterpart in the $50 billion in
the flight capital to Switzerland tabulated in the “Lagarde list”). In the United
States, debt-strapped cities are forced to privatize their roads and even sidewalks
to raise money to pay bondholders. In this sense rising land rent and monopoly
rent go together, a result of anti-classical and pro-financial tax policy.
Moral Hazard: “Socializing the risk” of bad loans (see Bad Debt) or gambles
via taxpayer bailouts of bankers or bondholders who lose money on bad and
even fraudulent loans. There is nothing socialist (although some call it
“socialism for the rich”) about this particular form of Big Government. A better
term for this moral hazard is “oligarchizing the risk.” (See State Socialism.)
Reversing the idea that the role of banks and other financial institutions is to
serve the economy, financialization sacrifices the economy to protect the One
Percent from suffering losses on its assets and bad loans. The effect of such
subsidy to banks Too Big To Fail/Jail is to shift assets from the public at large
(the 99 Percent, euphemized as “taxpayers,” although the Federal Reserve plays
the major role) to the financial sector (the non-taxpayers under oligarchies).
For instance, the U.S. Government reimbursed uninsured depositors in high-
risk S&Ls in the 1980s, leading to insolvency of the Federal Savings and Loan
Insurance Corporation (FSLIC) after a fire sale of assets. In the wake of the 2008
crash Ireland’s government likewise bailed out Anglo-Irish Bank depositors at
public (taxpayer) expense, plunging the economy into depression. Moral hazard
also increased as the bubble economy gained momentum leading up to 2008.
under Robert Rubin’s gang, Citibank embarked on a series of risky ventures,
secure in the knowledge that the Obama cabinet (following Citigroup’s
recommendations) would bail it out. The alternative, bankers threatened, was to
block depositors from access to their banks’ ATM machines.
Murabaha Loan: Moslem law bans the charging of interest (usury), but
permits loopholes that achieve a similar effect in practice (see Agio). A
murabaha mortgage loan is extended without nominal interest to purchase a
house or other property, but the borrower pays a rental charge until finally taking
ownership, after paying a stipulated amount to the creditor/owner. The rental
contract and purchase price are set high enough to incorporate an equivalent
interest charge. (See Sharia Law.)
N
is for
Neofeudalism and its Neoliberal Advocates
National Income and Product Accounts (NIPA): The main source of data on
general economic activity in the United States. Seemingly “objective” simply by
virtue of being quantified, their conceptual organization follows the anti-
classical revolution of the late 19th century, denying that any category of income
is unearned. Any activity that is paid for deemed to be “output,” except for
crime, bribes and extortion, which do not appear in the NIPA despite their
economic importance. No attempt is made to distinguish economic rent from
profit by specifying land rent or overall rental payments for land, natural
resources, monopolies or the financial sector. Yet the mainstream media treat
each change in GDP as if it reflects overall welfare. This confuses output with
overhead.
François Quesnay (see Physiocrats) created the first national income
account, the Tableau Économique (1758) to focus on the flow of rent to France’s
landlord class. Its aim was to quantify the land rent available for taxation. (See
Single Tax.) By contrast, the NIPA make such a calculation convoluted,
although they do show that the real estate sector has reported almost no taxable
revenue since World War II, thanks to the tax-deductibility of interest and
fictitious and over-depreciation.
Natural Monopolies: See Monopolies, Public Domain and the Commons.
Neoclassical Economics: A term coined by Thorstein Veblen for the
conservative reaction in the last quarter of the 19th century opposing the socialist
tendencies toward which classical economics was leading. The main aims of this
post-classical economics were to strip away the characterization of groundrent
and other economic rent as unearned income, and to ward off any analysis
showing how governments played a productive role as investors in public
infrastructure, money creators or regulators. (See Austrian School and John
Bates Clark.) And by taking the existing institutional and property environment
for granted, the marginalist approach avoided discussion of the structural
reforms needed to cope with economic polarization, the economy-wide
expansion of debt, and the FIRE Sector’s mode of rent-seeking and “virtual
wealth.” So a more apt term would have been post-classical economics, because
it rejected the political dimension of political economy.
Neoliberal Disease: A term coined by Jan Hellevig to describe the free hand
that leaders of the demoralized post-Soviet bureaucracies gave neoliberals to
redesign and de-industrialize their economies by creating client kleptocracies.
“They freed the markets, but only for the criminals. They totally neglected
investments to modernize the industry, and let the assets and cash streams be
openly or covertly stolen by insiders and the mob. The result was total chaos and
the breakup of the Soviet Union.”1
Ninety-Nine Percent (as in “We are the 99 Percent”): A term coined during the
Occupy Wall Street protests in 2011 to emphasize that incomes and net worth
for the vast majority of the population have not grown since the financial
meltdown of 2008. After price adjustments, the average wage has not increased
since the mid-1970s, while the minimum wage has fallen steadily in purchasing
power. The result has been a growing wealth gap between the One Percent (the
wealthy elite) and the 99 Percent who are not super-rich. (See Traumatized
Worker Syndrome.) NINJA Loans: Acronym for junk mortgage loans to
borrowers with No Income, No Jobs or Assets. These “liar’s loans” (without
documented borrower income statements) are euphemized as “Alt-A”
mortgages. The liars are mainly the real estate brokers and banksters who
packaged these loans, aided and abetted by the ratings agencies that sold AAA
credit labels to Wall Street loan packagers.
Occupy Wall Street: This protest movement began on September 17, 2011 in
New York City, three years after the financial melt-down of 2008 left the U.S.
economy stagnating while the Too Big to Fail/Jail banks and the One Percent
gained sharply. Using the slogan “We are the 99 Percent,” a small camp was set
up in Zuccotti Park in the Wall Street financial district. The sit-in/sleep-in lasted
a number of months before being broken up by a violent midnight police raid
that methodically destroyed the possessions of the occupiers and drove them out.
But by that time the movement had spread to other cities and even to Europe,
and inspired focus groups such as Occupy the SEC and Alternative Banking.
Oligarchy: Rule by the few, usually the richest One Percent. In Aristotle’s
political theory, oligarchy is the stage into which democracy evolves, and which
ends up becoming a hereditary aristocracy. “The essence of oligarchic rule,”
wrote George Orwell in Nineteen Eighty-Four, “is not father-to-son inheritance,
but the persistence of a certain world-view and a certain way of life ... A ruling
group is a ruling group so long as it can nominate its successors ... Who wields
power is not important, provided that the hierarchical structure remains always
the same.”
The word “oligarchy” has been applied to Russia’s kleptocrats who
obtained natural resources and other assets under Boris Yeltsin, most notoriously
in the 1994-1996 “bank loans for shares” insider deals. It also applies to Latin
American and other client oligarchies that concentrate wealth in the financial
and propertied class at the top of the pyramid. However, U.S. media vocabulary
defines any country as a democracy as long as it supports the Washington
Consensus and U.S. diplomacy.
One Percent, The: Coined during the Occupy Wall Street protest movement,
this term focuses on the growing wealth gap between the rentier elite and the 99
Percent. The statistics collected by Thomas Piketty and Immanuel Saez have
documented the widening disparity between the One Percent and the rest of the
population since 1980 in nearly all countries. Subsequent reports have described
how nearly all growth in U.S. asset values and income growth since the 2008
crash have been monopolized by just one percent of the population, mainly via
the FIRE sector. This One Percent increases its power by lending money and
creating new bank credit to indebt the 99 Percent, extracting a rising flow of
interest and other rentier income.
Overhead: The part of national income not necessary for production and
consumption to take place. This category includes economic rent, interest and
watered costs – which really are zero-sum transfer payments – as well as
military spending, government waste and corruption.
Ownership Society: The term coined by the George W. Bush administration for
policies aimed at increasing home ownership by extending junk mortgages to
NINJA buyers and others who signed mortgages with “exploding” interest rates
and balloon payments falling due. Lending to new buyers on recklessly easier
credit terms inflated the housing market, increasing the power of finance and
property relative to wage income by raising the price (and hence, debt levels)
that wage earners had to pay for homes. (See Asset-Price Inflation.) Bush
sugar-coated the resulting housing bubble on October 15, 2002: “We can put
light where there’s darkness, and hope where there’s despondency in this
country. And part of it is working together as a nation to encourage folks to own
their own home.”2
The aim of coining such euphemisms as “ownership society” is to divert
attention from the disproportionate share of assets owned by the top One Percent
of the population, plunging the economy into debt peonage instead of ownership
free and clear of debt.
A related euphemism along these lines is labor capitalism, siphoning off
wages into Employee Stock Ownership Plans (ESOPs) controlled by employers.
The kindred strategy of pension-fund capitalism is to bid up prices for stocks,
bonds and real estate. The political intent is to make employees feel that
although their paychecks are being squeezed, they will gain as stockholders and
homeowners. (“Sorry you lost your job. We hope you made a killing on your
home.”)
P
is for
Ponzi Scheme and Pension Fund Capitalism
Panic
Parallel Universe Parasite Partial Equilibrium Analysis Patten, Simon R.
(1852–1922) Pension Fund Capitalism Pentagon Capitalism Physiocrats
Planned Economy Poison Pill Polarization Politics Pollution Ponzi Scheme
Populism/Populist Postindustrial Economy Postmodern Economy Price:
See Just Price; Market Price; and Value Privatization Privilege
Productive Loan Productive vs. Unproductive Labor Profit
Progress Progressive Era Propensity to Save Property Prosperity Protecting
Savings Protectionism Public domain Public Investment Public-Private
Partnership Pyramid Pyramiding
Panic: The culminating point in the business cycle when asset prices plunge,
forcing property and financial securities to be sold to pay debts. (See Hyman
Minsky.) Panics pose the political problem of who will bear the losses and who
will be bailed out by government and the bankruptcy courts. Since 2008 the
banks and bondholders were bailed out by central banks across the world, not the
indebted economies at large. From the United States to the Eurozone, the legacy
of such panics is debt deflation.
Polarization: The tendency for economies to polarize between the One Percent
and the 99 Percent, above all between creditors and debtors. (See Credit and
Debt.) This tends to characterize bubble economies. (See Great Moderation.)
The tendency can be countered by progressive taxes focusing on economic rent
(unearned income) and asset-price gains (“capital” gains); not allowing interest
to be tax-deductible; keeping money and banking as a public utility; and creating
credit along productive lines instead of to inflate asset prices.
The income distribution chart (below)2 shows how the One Percent
monopolized income growth in the expansion (bubble) leading up to the 2008
meltdown, and further consolidated their position in the post-bubble economy
when payback time arrived for the debts that homebuyers and businesses had run
up in the hope that credit might make them rich.
Fig.6
Politics: Now part of the market economy as policy-making is put up for sale.
Under “pay to play,” politicians raise campaign funds from the wealthy One
Percent while seeking votes from the 99 Percent. Promising to protect the public
interest, politicians vie among themselves to deliver their constituencies to their
financial backers. The oligarchy’s aim is to keep election discussion away from
economic issues by focusing on identity politics such as ethnic minorities,
women and LGBTQ.
Pollution: The tendency for a given trend in the climate system or economy to
accelerate to the point where it stifles and destabilizes the overall system. Global
warming, for instance, is caused by runaway carbon-based fuel emissions. Sea
levels rise and weather becomes extreme as glaciers melt, causing the earth to
heat up faster as it absorbs more sunlight.
Debt pollution has a similar destructive effect. Increased lending to
households, industry and government extracts more interest and fees. This
concentrates income and property in the hands of banks and bondholders (see
FIRE Sector). The economy stagnates as debt deflation shrinks markets,
deterring new investment and employment.
Assuming that living in this way can continue in a stable trajectory without
taking protective counter-measures fails to take into account the self-reinforcing
tendencies of instability that accelerate over time. Failure to reverse debt
pollution by writing down debts with a Clean Slate is analogous to the failure to
stop carbon emissions and reverse global warming. In both cases pollution is
caused by living in the short run as the vested interests (the oil industry, banks
and bondholders) block counter-measures to restore the system’s stabilizing
checks and balances and halt the instability.
Ponzi Scheme: A financial operation in which early investors are paid with
money put up by new subscribers, not out of actual profits. Investor concerns are
allayed by promises of exorbitant returns, often from a hitherto “undiscovered”
scheme to make money. The Italian-American confidence man Carlo Ponzi
claimed to have found such an opportunity in international postage-stamp
arbitrage. Bernie Madoff was widely believed to be making gains by front-
running and insider dealing.
On the economy-wide level the term Ponzi Scheme is applied to financial
bubbles expanding at an exponential rate without earning enough income to
remain solvent. (See Compound Interest and Fragility.) For Hyman Minsky,
the Ponzi stage of the credit cycle occurs when debtors can avoid default only by
borrowing the interest falling due. (Banks often are willing partners in such
schemes.) Such Ponzi-type growth necessitates a constant influx of new capital
to avert bankruptcy. Collapse occurs at the point where new inflows of funds or
public credit creation no longer grow exponentially. (See Economic
Forecasting.) The U.S. junk-mortgage bubble, for instance, was sustained
until 2008 by the Federal Reserve and banking system creating enough
exponential growth in credit to enable investors to keep on making asset-price
gains (euphemized as the Great Moderation).
Productive Loan: A loan that enables the borrower to earn sufficient income to
pay the creditor and still emerge with a profit. Adam Smith cited as a rule of
thumb that the rate of interest tended to settle at half the rate of profit. That
would enable commercial borrowers to split their overall returns 50/50 with their
“silent partner” creditors (see Sleeping Partner). But rising debt leverage has
expanded the volume of today’s interest charges to absorb most profits in real
estate, and also in corporate takeovers by raiders financing their leveraged
buyouts with junk bonds (see Debt Leveraging). The aim is to make tax-favored
asset-price gains. Real estate investors are willing to pay the entire property
income as interest in order to emerge with such capital gains when they sell to
the next “greater fool.” Such bubble-economy speculation is “productive” only
to the extent that asset-price gains outpace the rate of interest. (See Cash
Flow/Ebitda and Pyramiding.) Such bank lending to bid up asset prices adds to
the economy’s debt overhead without expanding the means of production or
earnings.
Personal loans are deemed unproductive because they must be paid out of
income earned elsewhere rather than being invested productively to earn an
income. Junk education loans sponsored by for-profit colleges are said to be
backed by “human capital,” but this is a Doublethink euphemism for false
promises that their degrees will enable their graduates to earn enough additional
income to pay back the loan and its interest charges. The U.S. Government
recently recognized the need to write down such debts. These loans are an
example of fictitious capital – assets on the books of banks (and the government
that guarantees such frauds) with no real counterpart in the ability to be paid.
Progress: Today’s word “progress” has degenerated from its 19th- and 20th-
century meaning of democratic reform. Every process of social decay
euphemizes itself as progress, as if moving forward in time is invariably upward,
not retrogressive. (See Stages of Development.) So there is “real” progress and
false progress. The neoliberal ideology favoring rentier income over wages,
deregulation, financialization and privatization over public investment is
antithetical to classical political economy’s definition of social progress as
replacing feudal privilege with progressive income tax and regulatory policy
promoting greater equality of opportunity and income, mainly by taxing
economic rent and windfall to property and financial gains.
Theories of progress treat the debt buildup as cumulative and irreversible, in
contrast to ancient society’s idea of circular time with periodic financial clean
slates to restore economic balance from outside “the market.” Without debt
cancellations, economies evolve into oligarchies, which depict their takeovers as
“progress” and thus as morally justified on the ground of its seeming
inevitability. (See End of History.) Progressive Era: The 1890s to 1920s, when
leading politicians sought to cure society from the excesses of the Gilded Age.
Major changes in public policy included the income tax (Sixteenth Amendment
of the U.S. Constitution), direct election of senators (Seventeenth Amendment,
to counter government corruption), Prohibition (Eighteenth Amendment against
the vice of liquor), and women’s suffrage (Nineteenth Amendment, giving
women the right to vote). Labor unionization helped raise wage levels and
improve working conditions, promoting the rise of a middle class largely
through rising home ownership, better access to education. Socialist parties were
formed and gained influence throughout the world, while government
investment in basic infrastructure provided a widening range of public services
at subsidized prices or without cost.
These progressive moves led to a countervailing response. Creation of the
Federal Reserve system in 1913 shifted control of banking away from the U.S.
Treasury to Wall Street.3 And after World War I, banking practice throughout
the world shifted away from the German emphasis on industrial banking to the
Anglo-American tradition of collateral-based banking and speculative finance.
This reaction sought to justify itself by sponsoring a counter-revolution
against classical political economy, rejecting the concept of economic rent as
unearned income. Today’s junk economics rationalizes privatization and
financialization, reversing the tendencies toward the less polarized distribution
of income and wealth that underlay economic progress from the 1930s to 1980.
Property: It was mainly with land in mind that the French socialist Pierre
Joseph Proudhon (1809-1865) wrote: “Property is theft.” Military conquest has
been the traditional lever to privatize land, but as property becomes burdened
with debt, foreclosure becomes the main lever for creditors to pry it away. In the
past this was achieved by usury on an individual scale, but recently the public
domain has been privatized as creditors oblige indebted governments to
surrender to IMF conditionalities. (See Privilege and Kleptocracy.) Prosperity:
The opposite of austerity and the ideology of scarcity as propagated by Junk
Economics. (See Simon Patten and the economics of abundance.) Protecting
Savings: Banks and bondholders are euphemized as “savers,” identifying their
interests with those of pensioners and family savings. But if all credit were as
productive as is depicted, debtors would be able to pay and there would not be
defaults leading to a crash. But the economy’s overall volume of savings (other
peoples’ debts) mounting up at compound interest cannot be carried ad
infinitum. In the end it is an impossible task. Something must give when
bankruptcies wipe out borrowers. Governments are called upon to “make savers
whole” by compensating banks for losses on their credit creation and bubble
lending. (See Moral Hazard.) Protectionism: The policy of imposing tariffs
and quotas on imports, subsidizing exports, preferential “buy at home”
government spending, and blocked currencies to provide higher returns for
domestic industry and agriculture. This has been U.S. policy since the Civil War,
while promoting free trade for other countries. (See American School of
Political Economy.) The protected sectors claim that higher prices and profits
will enable them to invest more in raising productivity. That is how the
spokesman for England’s landlord class, Thomas Malthus, defended Britain’s
Corn Laws (its agricultural protectionism) after 1815. But whereas British policy
protected land rent, American protectionism supported profits on industrial
capital formation. American industrial strategists from Alexander Hamilton
through Henry Clay, Henry Carey and E. Peshine Smith argued for tariff
protection to serve manufacturing.
Pyramid: Ancient Egyptians devoted their surplus of food, labor and raw
materials to building stone pyramids to deify their pharaohs. Each time a
pharaoh died, a new monument and its funerary cult removed land and labor
from the economy.
Our modern economy devotes its surplus to a debt pyramid. Unlike Egypt’s
pyramids with their wide base tapering off toward the peak on top, today’s debt
pyramid is inverted: a narrow base of production and earning power at the
bottom with a widening financial overgrowth expanding exponentially at the top,
fed by the magic of compound interest. Interest and amortization charges on
this debt leave less income available for the rest of the economy, making the
base more unstable as it grows financially top-heavy, until the debt
superstructure tips over and crushes the economic base beneath it. (See Ponzi
Scheme.) Pyramiding: Debt leveraging (called “gearing” in Britain) involves
using as little of one’s own money and borrowing as much as possible, as long as
interest rates are less than the rate of profit plus capital gains. For these total
returns (income plus asset-price inflation) to continue to exceed the interest rate,
an exponential increase in bank credit is required to support enough asset-price
gains to enable borrowers to borrow the interest falling due.
The process is inherently self-terminating. The real estate bubble burst in
2008 when banks stopped lending new homebuyers enough to keep bidding up
prices fast enough. Existing mortgage debtors were unable to borrow enough
new credit to pay their debt-servicing costs once asset-price gains stopped. The
analogous Ponzi Schemes end when there are not enough new entrants to finance
the pace of cash withdrawals by earlier players.
Q
is for
Quandary
Quandary: A situation where a party cannot change position without making its
situation worse. (See Optimum.) Unlike a problem (which implicitly has a
solution), a quandary has no way out to save matters. Examples include the
Federal Reserve’s Quantitative Easing policy from 2009 to 2016. Keeping
interest rates low helped revive prices for real estate, stocks and bonds, and thus
saved the largest and most reckless U.S. banks from insolvency. But these low
interest rates also pushed pension funds and insurance companies into shortfalls
in the rate of return needed to pay retirees and policy holders. On the other hand,
raising interest rates would cause the dollar’s exchange rate to soar. It also would
raise borrowing costs and hence the cost of debt-leveraging. Speculation would
be cut back, rolling back prices for bonds, real estate and stocks, threatening a
new wave of insolvency for economies mired in debt. Hence, the policy
remained frozen throughout the Obama Administration.
Quantitative Easing (QE): Central bank support for bank credit creation to
drive down interest rates and re-inflate real estate and stock market prices. In the
wake of the 2008 crash the Federal Reserve and European Central Bank (ECB)
promoted new bank lending and arbitrage speculation as an alternative to writing
down debts. The hope was that new bank lending would re-inflate the bubble.
The European Central Bank’s QE (“as much as it takes,” said its president,
Mario Draghi) lent money and purchased bonds to bail out banks and
bondholders for their bad loans and investments. But it did not create money to
revive businesses or indebted homeowners and consumers. Focusing only on
subsidizing bank balance sheets, its aim was to save the financial sector and the
One Percent behind it, not the economy. So QE had little effect in coping with
the underlying problem, which was debt deflation. In fact, Eurozone
governments imposed austerity, sacrificing national economies by giving
priority to creditor claims.
In the United States, the Federal Reserve accepted mortgages and other bank
loans at full face value as reserve deposits, enabling banks to meet their capital
ratios and create new electronic credit. But the $4.2 trillion U.S. Federal Reserve
creation of bank reserves did not increase commodity prices or wages as the
Quantity Theory of Money implied it would. Banks engaged mainly in
speculation. They bought foreign bonds and currencies, and lent to hedge funds
and for corporate share buybacks, mergers and acquisitions. None of this
financed new investment. The U.S. and European economies remained debt-
wracked and suffered deepening debt deflation.
Without QE the banks would have had to sell their loans in “the market” at
falling prices, at rising interest rates – further lowering the price of collateral-
backed bank loans, forcing yet further sell-offs. So in the name of saving “the
market,” the Fed and ECB overruled it in the aftermath of the 2008 junk
mortgage crash.
Apart from banks, other sectors of the financial markets suffered along with
the rest of the economy – above pension funds and insurance companies. Money
managers urged an end to the Federal Reserve’s Quantitative Easing policy to
hold down interest rates. One argument was that higher interest rates are
necessary to support workers in their role as consumers as well as pension plan
savers. It was almost as if labor obtains its spending money mainly from bonds
and stocks. “In the first place,” a fund manager opined in a Wall Street Journal
op-ed, “the Fed’s policy of zero or near-zero interest rates means negligible
returns on savings. Consumers thus have less to spend and those nearing
retirement need to save more.”1
This depicts workers/consumers as rentiers, not debtors. The trick is to get
indebted voters to think of themselves as savers, benefiting from higher interest
rates rather than suffering as debtors. “In human terms, the Fed’s policy means
emergency room nurses in Texas work longer hours to make up for low yields
on CDs, dairy farmers in Iowa forgo equipment purchases to save more for
retirement, charities for the homeless in Manhattan reduce services as
foundations cut grants, and local governments from Albany to Sacramento close
libraries to fund pension plan deficits.”1
The higher retirement savings required by nurses, farmers and charities – for
whom widows and orphans are stand-ins – are a result of how the economy has
been financialized. Debt service and compulsory savings are owed by these
nurses on their home mortgages and education debts, by farmers on their
equipment and mortgage debts, and by local governments on their borrowings.
Higher interest rates make these charges heavier. What is needed to alleviate
their financial squeeze is debt relief (see Clean Slates), along with a shift of
Social Security and pensions, health care and education back to the public sector,
to be financed out of progressive taxes on rentier income and wealth as well as
public money creation.
Quantitative Easing thus was a policy to save only the banks and
bondholders, not the economy at large. The effect since 2008 has been to sharply
increase the power of the One Percent over the rest of the economy. In the
United States, 95% of the population has seen its real income and net worth
decline during 2008-2016, despite the soaring stock and bond markets. And
while real estate hedge funds such as Blackstone have made a killing by buying
up foreclosed properties, home ownership rates have fallen back from 69% to
63.5%. The decline has been especially sharp for blacks, who were the major
victims of junk-mortgage loans, and for individuals under 35 years old, who
cannot afford to buy homes as long as they remain saddled with student debts
and other obligations in the face of a falling-wage economy. The “easing” in
Quantitative Easing has thus been only for the top of the economic pyramid.
Quantity Theory (Tautology) of Money (MV = PT): The myth that monetary
and credit expansion inflates consumer and commodity prices. Most bank
lending inflates asset prices, because most loans are spent on real estate, stocks,
bonds and packaged bank loans. Credit creation to finance the 2001–2008 real
estate bubble siphoned off a rising swath of income from homebuyers to pay
their mortgage debt, leaving less income available to spend on goods and
services.
Race To The Bottom: The policy of countries trying to increase their exports
(and attract foreign investment inflows) by cutting wages levels. Toward this
end, austerity programs ultimately are self-defeating. Without raising education
and living standards, labor productivity can be increased only by working labor
more intensively and cutting back health care and pensions. When the state of
Alabama cut education and health spending to minimize taxes, ostensibly to
attract business, companies pulled out on the ground that the state’s labor force
was too low-skilled and in bad health. New Jersey’s economy and employment
likewise suffered when it cut taxes instead of modernizing its transportation and
tunnels to New York City.
Reaganomics: The policy of cutting taxes for the wealthy (especially for real
estate investors) while increasing the Social Security tax on employees. (See
Alan Greenspan, Laffer Curve and Tax Shift.) The effect was to quadruple the
public debt during the 1981-1992 Reagan-Bush administration, while
dismantling environmental regulations and deregulating finance to produce a
wave of Savings and Loan (S&L) fraud, junk-bond takeovers and a stock
market bubble. This was euphemized as “wealth creation,” not debt creation.
Real Economy: The National Income and Product Accounts (NIPA) define
“real output” as all the economy’s transactions fit to record (but not crime and
fraud). This GDP measure is then deflated by an index number for price inflation
of goods and services.
But not all of this is “real” in the sense of actual production, consumption
and new capital investment. The essence of the tangible economy is the circular
flow in which employers earn profits, which they invest in capital goods and pay
their employees, who spend their income to buy the goods they produce. (See
Say’s Law.) Fig.7
Fig.7
Banks, landlords and monopolists do not make products. Yet the NIPA include
the FIRE sector as part of the economy, not as a subtrahend diverting wages and
business income to pay interest and economic rent. The FIRE sector uses its
legal privileges to extract income from the economy in a zero-sum rentier
activity. So “real” does not refer to the actual production, distribution and
consumption of goods and services. What turns out to be most “real” – in the
sense of being an inexorable burden, to be paid first “off the top” – is the
superstructure of debt and credit, monopoly rights and privileges in which the
mode of production is wrapped. (See also Government and the Two
Economies.) Junk Economics conflates this dominant FIRE sector with the
production-and-consumption economy at large, refusing to acknowledge its
different role, dynamics, and its political and legal levers of control over
government policy.
Real Estate: Literally “royal” estate, reflecting the idea that land and its rental
income is held for public purposes and to defray public expenditure (originally
to supply fighting men and corvée labor). As land and natural resources have
become privatized, they also have been financialized, that is, bought on credit.
Seeking debt-leveraged asset-price gains, investors are willing to pay land rent to
banks as interest, creating a debt overhead for the economy as a whole. Banks
thus have ended up with what “originally” was paid to the community or
government as taxes.
Real Wages: Economic jargon uses the term “real” in an idiosyncratic way. It
refers only to a price adjustment, often applied to concepts that are somewhat
unreal to start with. “Real wages” refer to money wages adjusted for the erosion
of purchasing power as measured by the rise in the consumer price index (CPI).
The adjustment is supposed to reflect the decline in purchasing power of
nominal wages when the cost of living rises. This measure shows that there has
not been a real gain of annual wages since the 1970s. If annual wages rise by a
nominal amount (say, 2% a year), but consumer prices also rise by this much,
there has been no real gain. And if the CPI rises faster than wages, wage-earners
“really” receive less.
But even this measure fails to reflect the erosion of labor’s real living
standards. In recent years wage earners have suffered from an much more
unpleasant reality. They are not able to consume anywhere near what they are
paid, because a rising proportion of their household budget must now be paid to
the FIRE sector as debt service, rent and other housing costs and insurance, as
well as steeper FICA wage withholding. (The “Hudson Bubble Model” later in
this book explains the accounting.) So what really is “real” is substantially less
than what is reported as real wages. The CPI refers to the shrinking proportion of
household budgets (perhaps as little as one third) that is spent on commodities.
What is missing is the rising carve-out for debt, rent, and other FIRE-sector
rake-offs.
Real Wealth: The market price of assets deflated by the rise in the consumer
price index (CPI) or a Gross Domestic Product (GDP) price deflator for goods
and services. The implication is that wealth is eroded when wages or prices rise.
But the wealthy do not spend much of their income on consumption, so this
adjustment seems irrelevant.
The way that most of the One Percent makes its fortunes is not “real” in the
sense of producing value in the form of goods and services. “Wealth” today
refers not only to tangible means of production, but to any bankable asset. A
“wealth” fund consists of financial claims on society’s means of production (in
the form of mortgages and other bank loans, stocks and bonds) – what Frederick
Soddy called virtual wealth, which rightly should appear on the liabilities side
of the economy’s balance sheet.
The problem with confusing real wealth with financial claims is that rising
access prices for housing and other basic needs is treated as a gain for “the
economy” as a whole. The middle class imagines itself to be growing wealthier
as the price of its housing rises – on credit – causing debt deflation for the
overall economy and thus slowing real wealth creation.
Regressive Taxation: The reverse of progressive taxation: a tax policy that falls
on the lower income and wealth brackets instead of on the highest. (See Tax
Shift.) Examples include replacing income taxes with a Value Added Tax
(VAT) that falls on consumers, and financing Social Security and health care
programs with user fees instead of out of the general budget. (See Alan
Greenspan and Laffer Curve.) Regulation: From a root meaning to rule (as in
regal). Every society is regulated in one form or another. Rulers create
regulatory systems that in principle (or at least, as a cover story) are supposed to
maximize growth and prosperity. When today’s governments deregulate, they
relinquish planning power to the financial sector. The result is as centralized as
is public regulation, and favors rentiers instead of limiting their power. (See
Planned Economy.) Regulatory Capture: Banks and other rent-extracting
sectors gain control of public regulatory agencies by blocking nominees who
might actually regulate, tax or prosecute the FIRE sector and monopolies.
Reversing the classical objective of checks and balances on privatized rent
seeking, the neutered agencies act on behalf of the vested interests to promote
oligarchy. Recent examples include Wall Street pressing to appoint Alan
Greenspan as head of the Federal Reserve Board, and to put Robert Rubin’s
protégés and Goldman Sachs alumni in charge of treasuries and central banks
in the United States and Europe. The aim is to remove policy making and law
enforcement from democratic government to Wall Street, the city of London,
Frankfort, and the Paris Bourse.
Rent, Monopoly: As with all economic rent, monopoly rent is the excess of
price over real cost-value. Britain created royal monopolies in the form of
privileged trading companies, from the East India Company in 1600 to the
South Sea Company in 1711. In modern times privatized public utilities (such
as Carlos Slim’s Mexican telecom monopoly) and technology companies such as
Microsoft and Apple, obtain monopoly rent – as much as the market will bear,
without public anti-monopoly legislation or enforcement – by charging access
fees to use their phones or the software installed on computers around the world.
David Buchanan’s 1814 notes to Adam Smith’s Wealth of Nations described
groundrent as monopoly rent, resulting from the scarcity of land. (Ricardo
attributed land rent solely to the advantage of fertile soils over zero-rent land at
the high-cost margin of cultivation.) Monopoly rent and groundrent (including
for oil, gas and other natural resources) are the major revenue flows that today’s
creditors seek to transform into a flow of interest and dividends. So in principle,
monopolies should be included in the FIRE Sector, starting with the natural
resource sectors (oil and gas, mining, water and forestry).
Rental Income (as distinguished from Economic Rent): The overall “house
rent” or commercial property rent paid to landlords. This gross rent includes not
only land rent but also covers returns for the building’s cost-value, plus current
operating and maintenance costs. For commercial investors, “rent is for paying
interest.” When real estate prices are rising (see Bubble Economy) their strategy
is to put down as little of their own money as possible, using the rental income to
carry the bank loan. The aim is to end up with a capital gain when they sell the
property.
For the economy at large, this process leaves government with no income tax
receipts, only a modest property tax that is just a fraction of what bankers
receive from the real estate sector as interest. (Property taxes typically are just
1% of the assessed property value, compared to about 6% for mortgage interest.)
Rent of Location: The rental income resulting from favorable location, which is
now the main monopoly character of land rent. In his 1826 book Die isolierte
Staat [The Isolated State with Respect to Agriculture and Political Economy],
Heinrich von Thünen distinguished this type of rent from Ricardian rent
attributed to soil-fertility differentials. Location rent is increased by railroads,
subway lines, roads and other transport infrastructure, by better schools and
neighboring parks, and by zoning permission to shift land use from agriculture
or brownfields to more remunerative commercial or residential use or higher-rise
buildings.
Rent Seeking: A zero-sum activity in which one party’s gain is another’s loss,
unlike new capital investment and hiring that expand an economy’s production
and income stream. The classical meaning of “rent seeking” refers to landlords,
natural resource owners or monopolists who extract economic rent by special
privilege, without their own labor or enterprise.
Neoliberals have diverted attention from the land rent, resource rent or
monopoly rent that classical economists associated with the FIRE sector. They
have re-defined “rent seeking” to refer only to politicians and labor unions
lobbying for “special privileges,” such as Social Security, a minimum wage and
public programs to meet other basic needs. But these programs have nothing to
do with classical rent seeking. They are proper functions of government.
In introducing the term “rent seeking” in 1974, Anne Krueger applied it to
import licensing and quotas that she claimed interfere with free trade, and
extended the idea to government regulation in general – including legislation
setting a minimum wage, claiming that this led to rising unemployment.4 Gordon
Tullock, a follower of Ludwig von Mises (see Austrian School), defined rent
seeking as lobbying by politicians for special privileges such as higher Social
Security payments!5
As a high-ranking World Bank and IMF official defending free trade, Ms.
Krueger opposed agricultural protectionism designed to save foreign economies
from food dependency on U.S. farm exports. Conflating rent seeking with
subsidies to modernize, her 2012 book Struggling with Success (p. 86) accused
all government regulations, tariffs and subsidies of being bad and wasteful.
“Ultimately, regulation has negative effects on the market in the country
imposing the regulation ...” The political effect of such deregulation and non-
subsidy is to let “the market” pass by default to financial managers – as if their
own major aim is not to seek classic economic rents to empower themselves as
monopolists and financial rent seekers!
Nobel Prize-winner James Buchanan’s euphemistic “public choice” anti-
government philosophy (that government should make no choices, except to
disappear) goes so far as to claim “that a tax with more excess burden,” such as
taxing wages or industrial profits (adding to the cost of living and doing
business) is better than a more reasonable tax on land rent with less burden. His
argument is that classical rent theory would work, but that this would increase
government power, precisely by being reasonable and economically efficient –
“because government, if allowed to tax in the less burdensome way, may get
more revenue,” which Buchanan opposes.6
Such language makes a travesty of economic vocabulary. It strips away the
classical association of rent with the FIRE sector, applying it only to the “cost”
of government regulations and pretending that only government bureaucrats
receive economic rent, not private sector rentiers. This leaves out of account the
obvious fact that a strong government is needed to overcome opposition from
predatory vested interests. The political effect of “public choice” ideology and
its self-proclaimed “libertarian” doctrine is thus to serve as a handmaiden to
oligarchy. It relinquishes economic rent to the FIRE sector instead of taxing it.
At the end of this road, imagine everyone paying user fees for everything
from fire hydrants to schools, turning every road and parking space into a toll
road. Payment for these erstwhile free public services would be made to owners
and financiers of these natural monopolies, free from public regulation or other
“Big Government” acting to save the economy by preventing predatory fees. In
the name of opposing economic rent as “socialism,” AKA “the road to serfdom,”
“public choice” doctrine thus prepares the groundwork for classic rent grabbing,
financialization and kleptocracy.
Road to Serfdom: During World War II, Frederick Hayek wrote The Road to
Serfdom to accuse the Progressive Era’s public regulation as leading inevitably
to centralized bureaucracies of the Nazi or Soviet type. The book became an
ideological bible for subsequent neoliberals such as Margaret Thatcher to shrink
government authority and privatize the public domain. What they failed to
recognize that inasmuch as every economy is planned, such efforts leave a
political vacuum, which is filled by giant financial institutions. Their mode of
planning imposed by the IMF, World Bank and Washington Consensus has
turned out to be the real road to serfdom by loading down economies with
unproductive debt, imposing austerity on the populace and using the resulting
financial crisis to assert dictatorial powers over government at the expense of
labor and of debtors, as in Greece in 2015.
Instead of democratic governments leading the world beyond the legacy of
feudalism, Hayek’s followers are headed by financial planners eager to impose
client oligarchies, austerity and debt deflation, leading to neo-serfdom. The
financial sector captures control of national treasuries and central banks. (See
Regulatory Capture.) The result is that in contrast to public planning protecting
society from economic rent and similar exploitation and taxing wealth in ways
that promote prosperity, Hayek’s Wall Street admirers such as Alan Greenspan
shift the tax burden off wealth onto labor and pursue related anti-labor
“reforms.” (See Free Market, Labor Capitalism and Race to the Bottom.) By
defining “serfdom” as a government powerful enough to check the power of the
property owners and their financiers, Hayek’s proposed road to avoid “serfdom”
is actually a road to debt peonage. Instead of progressive tax policy and public
infrastructure investment aiming to minimize the cost of living and doing
business (by bringing prices in line with real cost-value), financial planners aim
at maximizing prices for real estate, stocks and financial securities, especially
relative to wage levels. That is the real road to serfdom – dismantling
government and turning its planning over to financial centers to create a
neofeudal oligarchy.
Fig.8
Fig.9
S-curve: The typical shape of growth in nature. Human beings and other living
organisms taper off in height and size as they reach maturity. Most business
recoveries also taper off as employment, raw materials and resource limits are
approached. Profits slow as rents, wages and commodity prices rise while debt
and interest charges grow at compound interest, stifling business expansion
(usually in a financial crisis). (See Economic Forecasting.) Fig.10
Sanctity of Debt vs. Debt Cancellation: For more than half of recorded history,
from 3000 BC to 1000 AD, religions sanctified the cancellation of personal
(non-commercial) debt so as to prevent debt bondage and widespread forfeiture
of self-support land to foreclosing creditors. The Biblical Jubilee Year (deror in
Leviticus 25) was a direct descendent of Babylonian andurarum antecedents.
(See Clean Slate.) Today’s neoliberal crucifixion of economies on a cross of
debt and austerity thus reverses the original economic core of the Judeo-
Christian ethic.
Say’s Law: Named for the French economist Jean-Baptiste Say (1767-1832),
this “law” states that “supply creates its own demand” as employees spend their
wages on buying what they produce. Payments by companies to their employees
thus would equal what employees buy from said companies. If this application
of circular flow really were the case, there would be no business cycles or
depressions. John Maynard Keynes accordingly devoted a large part of his
General Theory (1936) to explaining why this circular flow is interrupted,
blaming the financial system.
By ignoring the fact that finance and property (the FIRE Sector) are
independent from the “real” production and consumption economy, Say’s “Law”
fails to operate mainly because of rent extraction (the culprit in Ricardo’s
analysis) and debt deflation (explained most classically by the American
economist Irving Fisher). Typical American blue-collar budgets leave only about
a third of gross wages available for discretionary spending on goods and
services, after paying the FIRE sector and taxes.
Serfdom: The final stage of Rome’s imperial breakdown after the creditor
oligarchy blocked the government from taxing the wealthy or protecting debtors.
A quarter of the population was reduced to debt bondage or outright slavery.
Coinage was adulterated as taxes were cut and economic life on the land
reverted to barter as the debt overload crashed the economy. Cities were
depopulated as Western Europe dissolved into manors under local warlords who
became feudal landlords. In the absence of a debt cancellation, their luxury
spending was the main monetized activity. Their status became hereditary, while
cultivators were tied to the land as serfs. (See Feudalism.) Shareholder Value:
An ambiguous term that usually represents a company’s “book value” or the cost
of having acquired its assets. This measure reflects the prices paid for real estate,
monopolies and other rentier claims that may have no inherent cost of
production in the classical sense (except payments to lawyers and politicians).
So meaningful book value is difficult to calculate in practice. A company may
carry undervalued real estate at a low outdated price, for instance, making it a
takeover target.
Alternatively, stock prices may be established by projecting their income
streams, predicting prospective long-term earnings. Fast-growing companies sell
at a premium over their current reported income.
But the financial sector lives mainly in the short run. A company’s stock
price may be raised by financial engineering to pay out corporate cash flow
(ebitda) as dividends or used for share buybacks. The aim of today’s financial
managers is to produce higher stock prices (on which their remuneration is
based), not more affordable or better goods and services. Shareholder value is
often increased by “cost cutting” – ending pension plans and employer
contributions to 401Ks, reducing healthcare support, eliminating staff and
product lines, and banking offshore to avoid income taxes. The effect is to
reduce long-run production. (I discuss this short-termism in Killing the Host,
chapters 8-10.) Sharia Law: Much as medieval Christian law legitimized
charging agio and commercial “interest,” Moslem murabaha banking enabled
usury to enter through the back door by permitting creditors to take their returns
as a proportion of the borrower’s gain. A loan for real estate may be structured
as a rental until the balance is paid off. Or, a loan to a merchant may be
structured as a profit-sharing agreement. Lacking Christian financial law, for
instance, Spain’s Isabella and Ferdinand structured their investment in
Christopher Columbus’s voyages of conquest as a sharia loan.
Socialism: The term used by 19th-century writers across the political spectrum
for how they expected industrial capitalism to evolve. Ricardian socialists
believed that taxing the land’s rent, buying out the land or simply nationalizing it
would free society from feudalism’s most burdensome legacy, the extraction of
economic rent. Socialist policy advocates that natural monopolies and
infrastructure be kept in or transferred to the public domain. (The key problem,
of course, is to prevent corrupt management, just as in private investment.)
Liberal Parliamentary reformers in Britain as well as Marxian socialists saw a
need to gain control of the government to bring prices in line with intrinsic
value. This required being strong enough to overcome the power of the vested
interests seeking to protect their special rentier privileges.
Many “old” socialist policies have been adopted: pensions and public health
programs, progressive income taxation, anti-monopoly regulations and consumer
protection to free markets from fraud and lawbreaking. Denouncing such
policies as “socialist” thus implies that the free market economics of Adam
Smith, John Stuart Mill and kindred 19th-century liberals were actually socialist.
The right-wing use of “socialism” as a term of invective – and “reform” to mean
the reversal of Progressive Era reforms – is an attempt to roll back pensions and
public investment. The label “socialism” is applied to any critique of the
neoliberal policy of looting pension funds, selling off public infrastructure to pay
bondholders, shifting taxes onto consumers and wage earners, and deregulating
economies for rent extractors and financializers. (See Oligarchy and
Kleptocracy.) Soviet Russia’s totalitarian state is an entirely different case (see
Stalinism). Confronted by Western military opposition to force “regime
change,” it became a war economy under permanent emergency rule. Stalin’s
forced industrialization without a democratic middle class (indeed destroying the
kulaks and bourgeoisie) was the antithesis of early socialism and Marxism. But
its traumatic experience threw into question just what socialism and a planned
economy was all about.
For European socialists, what was planned were to be constraints on
privilege, rent seeking and kindred exploitation. Marx even supported free trade
with India, on the logic that British industrial imperialism would lead to
modernization of backward colonies.1 Once freed from post-feudal privileges for
landlords and bankers, he believed industrial capitalism would evolve toward
socialism in the interest of the majority of citizens, the working class. By the
20th century the major political issue of politics in Britain and other countries
had become “not socialism versus capitalism, but the forms which socialism
shall take and the pace at which it shall be developed.” These various forms
were “an outgrowth of English classical political economy as was Capital
itself.”2
But many nominally socialist parties gaining office today throughout Europe
and Latin America have turned into the opposite of the socialism of a century
ago. They endorse privatization and austerity, headed by Tony Blair’s neoliberal
British Labour Party and Greece’s PASOK, and indeed the Second (“Socialist”)
International.
Socialism for the Rich: See State Socialism.
Stagflation: During the Vietnam War years in the late 1960s and 1970s, U.S.
prices rose rapidly (along with interest rates) without spurring new investment
and employment. (See Inflation and Money.) The opposite condition is today’s
stagnating deflation: Quantitative easing by central banks lowers interest rates,
but fails to induce new investment (what John Maynard Keynes called the
liquidity trap) or re-inflate commodity prices or wages. Debt deflation causes
economic stagnation, ultimately more serious and persistent than inflation.
These three functions have always been public (see Stages of Development):
All these roles of money involved public institutions, which “free market”
economics denigrates by pretending that governments play no role except to
impose “overhead” transactions costs, not to save the private sector from fraud
and cheating. What most mainstream monetary theory leaves out of account is
the historically most important function of money: to denominate debts. The first
formally monetized debts were owed to Mesopotamia’s temples and palaces.
That is why rulers set price ratios for grain and other commodities serving as
money to pay fees and debts to these two large institutions.
Student Loans: Just as real estate is worth as much as a bank will lend – and
costs more and more as lending terms are loosened – so the price of education is
inflated on credit. The larger the government-guaranteed debt leverage, the more
colleges are able charge for the sale of degrees – without regard to whether the
loan creates the means to pay it off. The volume of U.S. student debt soared to
$1.4 trillion in 2016 – more than credit card debt (see chart below). This debt
must be paid regardless of whether students graduate or earn enough to pay off
the loans, because it cannot be wiped out by personal bankruptcy under the
harshly rewritten recent bankruptcy code. To carry their debt service, graduates
often must keep living at home with their parents, deferring family formation.
(See Debt Deflation.) Fig.11
The cover story enabling universities to raise their fees is that lending to students
finds its counterpart in “human capital” yielding a higher income on educational
“capital.” But government-guaranteed education loans have led to a proliferation
of for-profit diploma mills, whose courses have little linkage to training of the
sort that actually increases income. In any case, most of the increase in earnings
by graduates must now be turned over to banks, as interest on their student loans.
The fruits of “human capital” thus end up enriching finance capital.
Systems Analysis: A technique for viewing the impact of any given change on
all parts of the economic, political and social system, based on positive feedback
such as increasing returns, or damping negative feedback (diminishing returns).
What neoclassical economics dismisses as externalities often turn out to be most
important for the overall social system, e.g., debt deflation. As such, macro-
analysis is the antithetical to the ceteris paribus reasoning (Latin for “all other
things remaining equal”) that underlies mainstream economics. (See X and Y
Axes.)
T
is for
Trickle-Down Economics
Tax Shift: A reversal of progressive taxation to favor finance and property (the
FIRE sector). Taxes historically were levied mainly on land, because it is the
largest and most visible form of wealth. From ancient times through medieval
Europe, people living on the land were the source of corvée labor and service in
the military. This was the archaic basis for assigning land tenure rights: land and
its rent were for paying taxes, at first “in kind” and later in money.
But since about 1980 (following Margaret Thatcher’s victory in Britain and
Ronald Reagan’s in the United States), taxes have been shifted off real estate
onto labor. Wage withholding for Social Security and health insurance is a
quasi-tax, rhetorically camouflaged as prepayment of user fees for public
services paid for out of the general budget. And large corporations are allowed to
establish “dummy affiliates” in offshore banking centers, pretending to make all
their profits in countries that have no income tax. (The process was pioneered by
the oil industry setting up flags of convenience in Liberia and Panama.) The
effect of these tax shifts is to intensify economic polarization, by adding fiscal
deflation (“fiscal drag”) to debt deflation for the 99 Percent, while spurring
asset-price inflation benefiting the One Percent.
“The Market”: Advocates of the status quo have always vied with reformers to
define and perpetuate the kind of market that serves their own interests. The
modern faith that economies work fairly and equitably – even by natural law – is
based on a definition of “the market” that deems rentier classes to be a natural
part of economies. Critics urge political reform of the context within which
markets operate. At issue is whether economic policy should focus on: 1.
Unbridled markets administered by the most powerful vested interests (the One
Percent), or 2. Society’s need for economic growth by appropriate regulation,
fair taxation and public spending and investment in infrastructure.
The choice will determine who will be the market’s major beneficiaries –
and victims. Opponents of public regulation construct academic models that
depict the Progressive Era and New Deal reforms that created the American
middle class as being “distortions” of “pure competition” and even
“deadweight.” Market failures since 2008 are blamed on “exogenous” factors
that lie outside the scope of these narrow “market-oriented” models.
This conservative approach ignores the fact that economic inequality is
widening and financial crashes are occurring because of the way in which
markets have become malstructured (see Structural Problem). Rejecting
government’s historic role in shaping markets to prevent economic polarization
from tearing communities apart, neoliberal theory goes so far as to idealize “the
market” as having no public context at all.
This narrow view demonizes the past two centuries of classical and
Progressive Era reforms to regulate credit, impose usury laws and treat money,
health care and other basic infrastructure as public utilities so as to reduce the
cost of living and doing business. If the Austrians and Thatcherites had their
way, civilization never could have taken off, and China could not have risen to
global economic power with its mixed public/private economy.
Classical economists analyzed how tax and regulatory policies shape
markets. The major problem they addressed was landlords “reaping [land rents]
where they have not sown” (as Adam Smith put it), collecting such rents “in
their sleep” (as John Stuart Mill put it). Their solution was to free markets from
economic rent by taxing it away or making basic infrastructure and other means
of production public. (See Fourth Factor of Production.) A fictitious
mythology of economic history brands the essence of Adam Smith, John Stuart
Mill and their advocates as “socialist” as an epithet, as if there can be no such
thing as a good proactive government policy with checks and balances that
promote fair and sustainable economic growth.
By John Maynard Keynes’s time, financial reform was taking its place
alongside land taxation as a policy to free economies from the rentier financial
class. (See Euthanasia of the Rentier.) But today’s neoliberal “markets” reverse
financial regulation, public banking and debt writedowns by promoting the
“sanctity of debt.” This turnabout is rationalized by the unrealistic assumption
that economies self-adjust in a fair and stable way without government action
from “outside” or “above” the market. In a travesty of Adam Smith’s “invisible
hand,” they denounce any such attempts as pernicious interference.
Freeing markets from predatory rent seeking requires (1) progressive
taxation of the rentier class and its unearned income, and (2) either anti-
monopoly legislation or public control of basic infrastructure to enable
government to provide public services at cost or on a subsidized basis. These
policies threaten the feudal epoch’s legacy of vested interests, which strive to
retain their time-honored free lunch (tax favoritism, untaxed capital gains and
other tax loopholes, control of bank credit and as many natural infrastructure
monopolies as they can take; see Kleptocracy). They seek to minimize
regulation or “public option” competition from governments.
Rentier lobbyists aim is to mobilize anti-government resentment of insider
dealing and oligarchy to discredit all government, especially socialist
governments. The trick is to get the 99 Percent act against their own self-interest
by not protecting themselves from these carry-overs of feudal privilege. (See
Stockholm Syndrome.) To deter reforms, pro-rentier client academics define
“the market” narrowly as a “free market” might exist without government
regulations or a public option. (See Learned Ignorance.) This approach shifts
blame for austerity onto “the market” as if it is a force of nature rather than
being based on policies favoring the FIRE sector.
The Nobel Economics Prize for what is euphemized as “economic science”
typically is given for the tautology that public regulations and subsidies impose
transaction costs that “interfere” with free markets. But as David Graeber points
out, contrary to the neoliberal assumption that markets came before governments
(as if governments evolved simply to enforce payment of debts and contracts),
the Bronze Age archaeological record shows that governments created and
sponsored the earliest markets. The prototypical contracts were with (or
mediated by) the palace or temples, sworn to by oaths to a god of commerce
and/or justice. And in modern times, the first stock markets dealt mainly in royal
debt. The 19th-century industrial takeoffs of Britain, the United States and
Germany (and Japan after World War II) saw their governments take the lead in
shaping markets with subsidies, tariffs (see Protectionism), taxes and direct
investment.1
Markets always have been regulated and subsidized (see Mixed Economy).
Antiquity’s temples oversaw the purity and weight of monetary silver as part of
their supervision of honest weights and measures. Mesopotamian rulers often
started their reign by proclaiming price ratios for silver, grain, copper and other
basic commodities in order to standardize fees for public services and other
fiscal payments. (See Money and Accounting.) And nearly every Bronze Age
ruler started his reign by annulling debts to create a Clean Slate. This long
tradition prompted Karl Polanyi (1886-1964) to organize a group of academics
to trace the extent to which markets are “embedded” in social rules that shape
exchange, trade and credit by public regulation of prices, interest rates and, in
modern times, anti-monopoly rules, consumer protection, usury and bankruptcy
laws, and debt cancellations.2
By demonizing the past century’s moves toward shaping markets more
equitably, discussion of the reforms that built up a prosperous middle class has
been airbrushed out of history and consigned to an Orwellian “memory hole.”
Voters are told that a market designed and controlled by the One Percent is a
natural outgrowth of free markets, despite the fact that the middle class and
industry are shrinking as a result of increasing debt overhead that concentrates
property and financial wealth in the hands of the One Percent.
To endorse financial austerity and oppose public money creation to finance
budget deficits or enactment of more humanitarian bankruptcy laws favoring
debtors (the 99 Percent), anti-government ideologues seek to keep governments
out of the monetary and financial regulatory sphere. Their sophistry depicts
money as having been developed solely by individuals engaging in barter with
each other. This mythology treats money simply as a commodity, not the legal
and fiscal creation that it historically has been. (See “As if” and Karl Menger.)
Budget deficits financed by public money creation to spend on public
infrastructure investment and social welfare programs are defined as market
“distortions,” on the ground that they lead to different prices and incomes than
would result without such intervention. Anti-usury laws, debt writedowns (see
Bankruptcy and Debt Forgiveness) and more humanitarian treatment of
debtors are deemed to interfere with the “freedom” of creditors (“capitalists” in
their lexicon) to impose financial and fiscal austerity (often backed by U.S.-
sponsored military juntas as in Augusto Pinochet’s Chile).
The bankers’ main fear is that government policies may favor labor,
consumers and debtors over the power of inherited wealth, employers and
creditors. The kind of “free market” envisioned by today’s Chicago Boys,
Austrians and neoliberals benefits the One Percent at the expense of society at
large. This array of pro-financial policies requires a censorship of alternatives.
To oppose claims that public regulation and oversight are necessary, neoliberals
assert that equilibrium will occur automatically, without markets requiring
government mediation to operate in a fair and equitable way.
Post-Soviet Russia gave U.S.-led neoliberals a free hand to create their
travesty of a “free market.” The result was a kleptocracy controlled by insiders
and monopolists who impoverished labor and created a demographic collapse.
Russia was turned from one of the world’s most literate and high-technology
populations into a raw-materials exporter, and its engineers and other
professional classes were driven to emigrate abroad – along with about $25
billion of capital flight each year. One recent writer summarizes the result: “In
the early 1990s, a highly placed World Bank research economist ... argu[ed] that
these countries were ‘victims’ of unreasonable egalitarianism, and all increases
in inequality, linked as they must be to higher returns to more productive
members of society, should be welcome.”3
By contrast, look at China’s socialist market economy to see how it avoided
austerity and rose rapidly to great-power status by following active government
policies akin to those of the United States and Germany during their industrial
takeoffs.
Too Big To Fail/Jail: The 2008 crisis revealed that pervasive fraud by the
largest U.S. banks was so systemic that the Obama Administration’s Justice
Department refrained from prosecuting the leading banksters. The excuse was
that recovering the fraudulent exactions of banks would bring them down, and
the economy with it. A more immediate political reason was that Wall Street had
gained the power to direct President Obama to recruit Eric Holder and Lanny
Breuer from the ranks of Wall Street law firms and put them in charge of the
Justice Department (see Regulatory Capture). They pretended that jailing
bankers would harm innocent spouses, children and bank employees.
No such concern was shown to victims of the banks’ junk mortgage fraud,
who were foreclosed on and evicted from their homes. The government not only
rescued the biggest banks, it allowed them to grow even more dominant, using
some of their gains to lobby Congress and pay millions of dollars to the political
campaigns of leading Senators and Congressmen on key financial and other
oversight committees to dilute reforms intended to prevent a recurrence of the
collapse.
It is all reminiscent of what Voltaire wrote regarding the law: “It is forbidden
to kill; therefore all murderers are punished unless they kill in large numbers and
to the sound of trumpets. In such cases it is the rule.”5 (See Criminal and
Crime.) Applying this principle to high finance, one may say that it is forbidden
to defraud and falsify records, and banksters are punished unless they steal in
large numbers and to the sound of applause by popular business media and the
politicians they finance with their loot.
Total Return: The sum of current income (profit, interest and/or dividends) plus
capital gains. In real estate, by far the major proportion of total returns consists
of asset-price gains. Most corporate income – especially real estate rent and
profits for financialized companies raided with junk bonds – is paid out as
interest or used for stock buybacks to increase share prices. This leaves
stockholders with capital gains instead of more highly taxed dividend income.
Tragedy of the Commons: A term coined in a lobbying effort claiming that the
public domain should be privatized to prevent its overuse and depletion. The
pretense is that users will overgraze and mismanage the commons in the absence
of rules governing access – as if privatization will do a better job of conserving
natural resources.
The term was coined by Garrett Hardin, who later acknowledged that the
“tragedy” was limited to unmanaged commons, which rarely occurs in practice.6
Neoliberals have ignored his back-tracking. It is their privatization that leads to
short-term asset stripping – precisely what they accuse socialism of doing!
Trickle Down Economics: The pretense that reversing progressive taxation and
giving more income to the wealthiest One Percent will maximize economic
growth and prosperity for the 99 Percent. The actual effect is to help the rich get
richer. (See Demagogy, Laffer Curve and Supply-Side Economics.) The
rentier class has manipulated the tax code so that, as Leona Helmsley put it:
“Only the little people pay taxes.” A supporting factoid is that the One Percent
spends its income buying products produced by labor. That was Thomas
Malthus’s argument for why British landlords should receive agricultural tariff
protection (the Corn Laws). His argument endeared him to John Maynard
Keynes, but in practice the wealthy bought largely foreign luxuries and financial
securities or more property. Today’s One Percent lend out their income and
wealth to further indebt the economy to themselves.
Another false assumption is that financiers and property owners (the FIRE
sector) will save and invest their revenue to expand the means of production and
employ more labor. (See Parallel Universe.) In practice, the wealthy wield
creditor power to force governments to privatize the public domain and buy
companies already in place. When the fictions of “trickle-down economics” lead
to financial crises, the wealthy demand that governments rescue banks, give
bailouts to uninsured depositors and bondholders, and shift taxes to further favor
the FIRE sector at the expense of labor. (See Moral Hazard.) The result of
trickle-down policy is thus economic polarization, not prosperity.
One of the earliest and most blatant expressions of trickle-down demagogy is
found in the pleading by Isocrates in his Areopagiticus (VII, 31-34, written in
355 BC). Like most Sophist rhetoric teachers, he charged fees so high that only
the wealthy could afford to study with him, so it hardly is surprising that his
written speeches supported the oligarchy. “The less well-to-do among the
citizens were so far from envying those of greater means that they … considered
that the prosperity of the rich was a guarantee of their own well-being.” This
may be the earliest written example of the Stockholm Syndrome.
Isocrates praised harsh judges for being “strictly faithful to the laws.” This
meant creditor-oriented laws. He noted that “judges were not in the habit of
indulging their sense of equity,” that is, what would be fair in the traditional
morality of mutual aid. His over-the-top rationale for why Athenian judges
“were more severe on defaulters than they were on the injured themselves”
(meaning the creditors “injured” by not being paid in full) was that “they
believed that those who break down confidence in contracts” (as if being unable
to pay was a deliberate attack on pro-creditor laws) “do a greater injury to the
poor than to the rich; for if the rich were to stop lending, they [the rich] would be
deprived of only a slight revenue, whereas if the poor should lack the help of
their supporters they would be reduced to desperate straits.” It is as if usury
doesn’t deprive the poor of their land and liberty, which Socrates did not
hesitate to explain as the “sting” of usury that stripped debtors of their land and
hence degraded their status as citizens.
Truthiness: A term coined by comedian and talk show host Stephen Colbert for
a made-up fact or story accepted by many as true simply because it reflects their
world view. An example: stories of “welfare queens” exploiting taxpayers, as if
the free lunch is taken by the bottom of the economic pyramid instead of by the
top. (See Factoid and Mathiness.) “Fake news” is now a worldwide
phenomenon. And “postfaktisch” (post-fact) has been named Germany’s Word
Of The Year (2016), reflecting what people want to believe or what is consistent
with their belief system, especially in cases where reality elicits cognitive
dissonance.
Since the 1980s, banks have created credit to lend mainly into the FIRE sector,
not to businesses in the “real” economy of tangible investment and employment.
This long credit buildup has inflated prices for real estate, stocks and bonds,
leading borrowers to anticipate that capital gains will continue indefinitely (see
Asset-Price Inflation).
Most of the FIRE sector’s financialized “wealth” – the asset side of its
balance sheet – is held by the rentier class. The magnitude is much larger than
the GDP. Its debt counterpart on the liabilities side of the balance sheet consists
mainly of mortgage debt, a financial overhead for homeowners and commercial
real estate. Since World War II, the “real” economy has spent more and more
income on real estate, insurance and payments to banks, pension funds and other
financial transactions.
Bubbles are created when speculation on credit enters the phase in which
debts rise as rapidly as asset valuations. When these financial bubbles burst,
negative equity results as asset prices fall back, plunging below the face value of
mortgages, bonds and bank loans attached to real estate and other assets. The
post-2008 collapse is the result of the “real” economy having to pay down the
debts it had run up, deflating consumer spending along with housing prices. This
debt deflation is the final stage of the “Great Moderation.” Nearly all
subsequent asset-price gains and income growth has accrued to the FIRE sector
and the One Percent.
Interacting with these two private sector economies, governments either
withdraw revenue by levying taxes and user fees, or (more frequently) spend
more money into the “real economy” and the FIRE sector than it withdraws. It
injects money into the economy by investing in public infrastructure and
undertaking current spending (largely military and Social Security). But since
2008 the Obama Administration has subsidized mainly the FIRE sector,
primarily with bank bailouts and the Federal Reserve’s Quantitative Easing. (See
State Socialism and Socialism for the Rich.) Budget surpluses (taxing more
than the government spends) drain income from the economy’s flow of spending
between producers and consumers. It is the government’s way of “saving” by
paying down public debt.
Budget deficits are financed either by borrowing from bondholders (obliging
the government to pay interest to them), or by fresh money creation, usually by
the central bank buying bonds from the FIRE sector. (The “Hudson Bubble
Model” article in this book shows the government sector’s role in the economy’s
flow of funds and the international sector.)
U
is for
Unearned Income
Usury: Biblical sanctions against charging usury were aimed at agrarian usury.
The royal Mesopotamian Clean Slates freed debtors from tax arrears and other
fees owed to public collectors or other creditors, but did not apply to commercial
lending. In medieval Europe, however, the word usury (from Latin usus fructus,
“use of the fruits”) referred to interest charged for any purpose – not only loans
to individuals (usually to pay taxes or buy consumer goods) but also to the
financing of profitable trade ventures. Thirteenth-century Churchmen replaced
“usury” with the less unpleasant word “interest,” having less negative
connotations and suggesting a partnership between creditors and debtors for
mutual gain. Since the Middle Ages the term “usury” has been limited to interest
charges in excess of the legal maximum rate.
On a society-wide level, usury polarizes economies. It is worse than merely a
zero-sum activity, because as Francis Bacon observed in his essay “On Usury”:
“Usury bringeth the treasure of a realm into few hands, for the usurer, being at
certainties, and the other at uncertainties, in the end of the game most of the
money will be in the box, and a State ever flourisheth where wealth is more
equally spread.”
(See also: Agio, Murabaha Loan and Sharia Law.) Utility Theory: The
idea that the more of any commodity one has, the more one is satiated, so that
each additional unit (say, of bananas) gives less utility. All commodities – food,
housing and most recently medical care and education – are treated as freely
chosen by “consumers,” not simply out of need to live and pay debts or rent.
Consumer “demand” is supposed to drive producers to “satisfy” them. This
“consumer is king” approach depicts the economy as being steered by its victims
instead of recognizing worker-consumers as exploited parties.
Assuming that individuals suffer the “disutility” of working in order to buy
consumer goods, this psychological speculation implies that individuals with less
money or consumer goods will be motivated to work harder and catch up with
those with more wealth – who presumably find less “utility” in earning and
consuming more. This idea of satiation as one gets richer (and presumably
consumes more) is the opposite phenomenon of wealth addiction.
Marginal utility theory is part of the late 19th century’s anti-classical
reaction. Taking policy structures and the distribution of wealth for granted, it
shifts the focal point of economics away from unearned rentier income (which
involves no labor or “disutility” at all) and monopoly pricing, and hence away
from institutional reforms to limit how wealth is obtained.
Value: For classical economists, value connoted the technologically and socially
necessary costs of production. Ultimately these costs were resolved into the
labor embodied in the cost of capital equipment, buildings and raw materials
used up in the process of production. The labor theory of value was an analytic
tool to isolate economic rent, interest and other property claims as transfer
payments, that is, elements of market price in excess of value.
Today’s post-classical era conflates value with price, not acknowledging the
degree to which prices exceed the necessary costs of production. Consumer
utility is viewed as defining prices regardless of their costs of production, subject
to the assumption that free competition will bring these prices in line with costs,
so that “utility” will reflect competitive costs. But this assumption becomes
unrealistic as economies become financialized and monopolized.
Value Added Tax (VAT): The most anti-progressive form of taxation, the VAT
avoids taxing non-production rentier income, falling on commodity sales at each
stage of production. Neoliberal advocates of VAT typically urge a tax shift of
fiscal policy away from income taxation, favoring a low flat tax equal for all
income brackets instead of progressive income taxation or taxes falling
specifically at rentier wealth. The VAT ultimately is passed on to consumers,
increasing commodity prices while leaving rent, interest and assets such as
stocks, bonds and real estate untouched. By contrast, a tax on property or rentier
income would lower asset prices, by limiting the flow of “free lunch” revenue
that can be capitalized into bank loans.
Value-Free Economics: The effect of “value-free” thinking is to prevent people
from making value judgments questioning the status quo. The aim above all is to
avoid characterizing rent and interest accruing to property owners and creditors
as being unearned. The FIRE sector is counted as producing an economic
product, not as overhead.
War: The major cause of national debts, balance-of-payments deficits and price
inflation, often followed by postwar deflation. Politically, war serves as an
excuse to centralize control of government in the Executive Branch, which
usually means in the hands of the few. Pentagon capitalism refers to the “cost-
plus” pricing policy of America’s military-industrial complex, by which
industrial engineers seek to maximize production costs instead of minimize
them. The higher the cost of production, the more the cost-plus contracts yield in
profit add-ons.
Watered Stock: Stocks and bonds issued by companies that receive nothing in
return for their increase in liabilities. (The original term referred to cattlemen
driving their herds to market and filling them up on water before they were
weighed for sale to the meat packers.) Railroad barons issued watered stock to
themselves and their Congressional backers in exchange for land grants and
public subsidy, not to raise money for investment. The practice anticipated the
stock options that today’s managers give themselves.
Wealth: The linguistic root of “wealth” bears a connotation of welfare and the
common weal. But increasingly it has taken the form of financial and other
rentier claims at the expense of social well-being. (See Virtual Wealth.)
Wealth Addiction: A Roman proverb observes: “Money is like sea water: The
more you drink, the thirstier you get.” The more money a rich man has, the more
driven he is to accumulate more. Greek dramatists portrayed the limitless greed
for money as a disease of the psyche. In Aristophanes’ last play, Ploutos (388
BC), Karion remarks that a person may become over-satiated with food – bread,
sweets, cakes, figs and barley – but no one ever has enough wealth. His friend
Chremelos agrees:
“Give a man a sum of thirteen talents,
and all the more he hungers for sixteen.
Give him sixteen, and he must needs have forty,
or life’s not worth living, so he says.”
(lines 189-93)
Compulsive wealth addiction tends to go hand in hand with affluenza.
Widows and Orphans: When lawgivers from Babylonia through the Bible
spoke of protecting widows and orphans, they meant the weak and needy: war
widows and children of men killed in fighting on behalf of their community, or
old and infirm individuals taken out of their family context on the land. But
today’s economics journalists speak of protecting widows and orphans who are
heirs or divorcees of the wealthy, living off their inheritance, trust funds, pre-
nuptial contracts and/or divorce settlements. They are to be protected from
inflation eating away at financial securities in which funds for their support are
invested.
The crocodile tears traditionally shed by financial elites for widows and
orphans – at least those living on interest from the bonds in their trust funds – are
now being shed for retirees as the pretended beneficiaries of policies favoring
high finance. During the Bubble years, inflating asset prices (and not taxing
“capital” gains) was defended on the logic that this would enable pension funds
to enable retirees to live in a prosperous way.
Regarding poor widows and orphans as being in need of public support
instead of being trust-fund rentiers, Herman Kahn’s liberal wife Jane told me
that when she asked Milton Friedman whether it was indeed desirable to provide
support for them, he replied: “Mrs. Kahn, why do you want to subsidize the
production of orphans?”
This view confuses correlation with causation, on the assumption that paying
more for anything will increase its supply. The political message is that
governments should not engage in social welfare spending, because this will
cause dependency instead of helping recipients to be self-sustaining individuals.
Windfall: The preferred (originally British) term for capital gain, an increase in
an asset’s price without the owner having to exert effort. Ricardo described
windfalls accruing to landlords in the form of economic rent as population
growth forced the cultivation of poorer soils, raising costs and hence crop prices.
But the major windfalls today take the form of asset-price inflation in the real
estate and stock markets. John Stuart Mill called such windfalls an “unearned
increment.” (See Free Lunch and Unearned Income.) World Bank: The
International Bank for Reconstruction and Development (IBRD), created by the
Allied Powers in 1944 along with the International Monetary Fund (IMF) to
finance the postwar reconstruction of Europe as a market for U.S. exports, and
loans to Third World countries to finance their trade dependency. Instead of
emulating the successful protectionist U.S. policies supporting agriculture with
import quotas, rural extension and credit services, the World Bank promoted
plantation export monocultures. It does not make loans in local currency, and
hence is precluded from promoting domestic food production by local
agricultural extension services and related price supports of the sort that have
made U.S. agriculture so productive since the 1930s. Countries following World
Bank advice became heavily indebted, falling into the grip of the IMF, which
withholds currency support if countries do not sell off their public domain to
global investors. (See Asset Stripping, Privatization and Washington
Consensus.) World System: A view of the global economy in terms of an
empire-building core that shapes and exploits the periphery (typically former
European colonies) into debt and food dependency.
X & Y
are for
the X & Y Axes
X and Y Axes
Fig.13
Zero-Sum Activity
GROUP #1: Myths resulting from distortions in the U.S. National Income
statistics (NIPA) that bury economic rent (unearned income), omit capital
gains, and exclude fraud and crime
GROUP #2: Myths of Finance Capitalism that rationalize its predatory
hold on the economy
GROUP #3: Myths of Labor Capitalism, Pension Fund Capitalism and
Social Security that promote transfer payments to the financial sector
GROUP #4: Myths that rationalize saving the bankers instead of the
economy
GROUP #5: Myths that the economy will achieve “balance” by shrinking
government
This chapter closes with some observations on recovering from these destructive
myths.
GROUP #1:
Myths resulting from distortions in the U.S. National
Income statistics (NIPA) that bury economic rent
(unearned income), omit capital gains, and exclude fraud
and crime
Sophistry applies not only to the use of language, but extends to seemingly
objective statistics. Any set of accounting categories reflects an economic
theory, and mainstream theory has been “cooked” to serve the FIRE Sector’s
rentier interests. Its cheerleaders promote false characterizations so persuasive
that most people mistake them for economic science. That is especially the case
when statistics give the illusion of objective reality, as long as one does not
question the concepts underlying their categories.
MYTH #1: The National Income and Product Accounts (NIPA) show how
fortunes are built up.
The NIPA exclude “capital” (asset-price) gains. Along with rentier income
syphoned off from the rest of the economy, these are the major means of
acquiring fortunes in today’s world. That is why many countries call financial
wealth “invisible.” What is unmeasured will be unseen, unresented and untaxed.
(See the Two Economies.) REALITY: Post-classical economics shies away
from distinguishing land and real estate ownership, banking and monopolies
from the industrial economy. Jumbling them together misses the fact that
economic rent is extractive, and that although real estate does not make a taxable
profit, rising property prices are the aim of most real estate investment. The goal
of real estate investment is to ride the wave of debt-fueled asset-price inflation.
The myth is that fortunes are built up by saving out of “earnings,” not by
financially inflating asset prices. Yet the NIPA promote the fiction that the real
estate sector does not make a profit. That sector reports no earnings for years on
end. So where is “saving” to come from?
The answer is capital gains. But these are statistically invisible. NIPA
statistics exclude the “capital” (asset-price) gains that are the dominant element
of total returns.
NIPA statistics also do not indicate land rent and other forms of economic
rent as such, and national balance sheet calculations by the Federal Reserve do
not provide realistic estimates for land, or make any attempt to evaluate rent-
extracting assets as distinct from manmade capital investment. Hence, there is no
index of the rising cost of housing stemming from landlords or their mortgage
lenders enjoying a free lunch “in their sleep.”
Theories of the “falling rate of profit” that fail to segregate the FIRE sector
from the industrial economy are swamped by the fact that real estate is the
largest sector, and by far the largest debtor as well as reporting the most
depreciation – a largely fictitious concept as used by real estate tax accountants.
Buildings rarely lose value; their sales price tends to rise. But they can be
depreciated again and again for tax purposes. The accounting fiction is that they
start losing value with each change of ownership, but then miraculously recover
this value – usually with a “capital gain” – with each change of ownership. I call
this phenomenon over-depreciation.
Fortunately, the NIPA statistics measure overall ebitda: earnings before
interest, taxes, depreciation and amortization. By far the largest component is
interest, typically absorbing over two-thirds of real estate ebitda. Interest is paid
out of overall rental income, but is tax deductible, on the pretense that it is a
necessary cost of doing current business. Homeowners as well as commercial
investors who borrow against their property can deduct interest charges (for
transferring assets) from their reported taxable income.
Next to interest, depreciation is the largest element of real estate cash flow.
These tax writeoffs for the depreciation tax loophole, as well as rising interest
payments, rarely leave any income to be declared. The statistical pretense
underlying the apparent falling rate of profit enables tax accountants for absentee
real estate owners to claim “book losses” to offset income earned on their other
operations, rendering them free of income taxation. This increases their actual
returns. However, homeowners are not allowed to claim depreciation; only
landlords and commercial owners can do this. As hotelier Leona Helmsley
famously said: “Only the little people pay taxes.” Tax favoritism for absentee
property owners is one of the most anti-progressive elements in modern tax
codes.
Finally omitted is the source of so many great fortunes: fraud and other
crime. The NIPA include payments for the cost of burglar alarms, police and
similar protection, but not the economic transfer payment to burglars, robbers
and embezzlers.
MYTH #4: Economic rent is earned, and is simply another form of industrial
profit.
MYTH #6: Any activity that makes money is part of “the market.” The
resulting status quo is morally justified as being simply “how the world
works.”
REALITY: Limiting the scope of analysis to current output and demand for
goods and services (GDP) leaves out of account the property, financial and other
rentier framework shaping the distribution of income and wealth. Where money
is to be made, predatory activity tends to be legitimized and its gains
financialized, mainly by the One Percent. All reforms, past and present, are
called “distortions” of the market.
MYTH #7: Capital gains are not income, and hence should not be subject to
income tax or contributions to fund Social Security.
REALITY: Money managers define total returns as current income plus asset-
price gains. Such gains are the major objective of FIRE sector investors. Yet
nowhere in the NIPA or in the Federal Reserve’s balance sheet statistics is there
a measure of asset-price gains for land, stocks and other financial securities. As
far as official statistics are concerned, the guiding principle seems to be that
what is not seen will not be taxed or regulated. (See Myth #1.) The 1913 U.S.
income tax applied the same rates to capital gains as to income, on the ground
that the effect was the same: an increase of wealth and “savings.” Unlike wages
and profits, asset-price gains result not so much from the owner’s own efforts as
from:
These ways of enrichment receive tax favoritism over wage income and
industrial profits earned on tangible capital formation. This is what has made the
One Percent primarily a rentier class, enriched by public subsidy while taxes are
cut on debt-leveraged financial and property gains.
GROUP #2:
Myths of Finance Capitalism that rationalize its predatory
hold on the economy
MYTH #8: Most debts can be paid without polarizing the economy and
concentrating wealth in the hands of creditors.
COROLLARY: Business downturns (“recessions”) are self-curing as wages and
prices fall, providing profitable opportunities for new investment and
employment to spur recovery. Hence, the economy appears to have no long-term
structural problem of debt mounting up from one business upswing to the next in
a financial super-cycle.
REALITY: The rate at which debts mount up at compound interest – plus new
bank credit – tends to outrun the economy’s ability to pay. The result is debt
deflation, a widening wave of foreclosures, debt peonage and IMF privatization
“conditionalities” that transfer the public domain to rent extractors.
Since World War II the debt overhead has increased from each business
recovery to the next, growing exponentially beyond the ability to be paid. That is
what led to the 2008 financial crash, and what is stifling subsequent economies
in debt deflation. Rising debt service (interest and amortization) diverts spending
away from goods and services, shrinking the economy and thus reducing
investment and new hiring. The inevitable financial crash forces the economy to
choose between writing down debts to the scale that can be paid (or in practice,
an economy-wide Clean Slate), or letting creditors foreclose, transferring
property ownership from defaulting debtors to the economy’s top financial layer,
while plunging the economy into chronic depression. In the ensuing fiscal crisis
the financial sector uses its economic and political power to force governments
to relinquish public assets (privatization).
MYTH #9: Privatization is more efficient than public ownership and
management.
GROUP #3:
Myths of Labor Capitalism, Pension Fund Capitalism and
Social Security that promote transfer payments to the
financial sector
MYTH #10: Employee stock ownership programs (ESOPs) and pension
funds, along with personal saving via mutual funds, are elevating workers to
the status of capitalists-in-miniature.
REALITY: Stock ownership remains concentrated in the hands of the top 10%
of the population. Most capital gains accrue to this 10%, and to upper
management for its stock options.
Pension funds in General Augusto Pinochet’s Chile, Margaret Thatcher’s
Britain and the United States have not used their stock ownership to improve
working conditions or wage levels. Pension and mutual funds tend to support
management rather than using their stock ownership to promote policies in the
interest of labor. The main effect has been to inflate equity prices by channeling
labor’s deferred wages (pension “savings”) into the stock market.
When markets are rising, employers may declare pension plans to be
overfunded and transfer their savings to the company’s own account. This leaves
the plans underfunded when markets turn down. Companies also use Employee
Stock Ownership Plans (ESOPs) to pay for mergers and acquisitions, which
dilute the plans and often wipe out most of their savings. The ultimate corporate
ploy is to declare (or threaten to declare) bankruptcy to wipe out or substantially
reduce pension-fund and healthcare promises. Bondholders are given priority
over pensioners and employees, who are shunted onto the government’s
underfunded Pension Benefit Guarantee Corporation (PBGC).
GROUP #4:
Myths that rationalize saving the bankers instead of the
economy
MYTH #13: The September 2008 financial crisis was one of temporary
illiquidity, not insolvency resulting from reckless and fraudulent lending.
REALITY: A bank is illiquid when a crisis freezes credit. The problem in such
cases is economy-wide shock, not the bank’s systemically bad loans. The freeze
temporarily prevents banks from meeting withdrawals by selling their mortgages
and other loans, so central banks provide credit to ride out the storm. However,
they are supposed to charge a high enough interest rate to deter banks from
borrowing to speculate. This is called the Bagehot Rule, named for the 19th-
century British economic journalist Walter Bagehot.
That rule was not followed in 2008. Headed by Citigroup and Bank of
America, some of the largest banks were insolvent as a result of reckless over-
lending without regard for borrowers’ ability to pay, or for what their mortgaged
homes could sell for on the open market. The Federal Deposit Insurance Corp.
(FDIC) was supposed to take over these banks instead of rescuing them. To
avoid this fate, the large Too Big To Fail/Jail banks mainly responsible for
junk-mortgage lending insisted that the market for these mortgages was only
drying up temporarily, so banks were not insolvent – or responsible for the
collapse of their balance sheets. Federal Reserve and Treasury officials
pretended that junk mortgages could be paid, despite some ten million U.S.
homeowners facing foreclosure, unable to sell their homes at prices that would
reimburse the banks.
Instead of punishing executives of the biggest banks for the frauds that led
the Department of Justice to collect civil fines of more than $65 billion from
2012 through mid-2015, the Federal Reserve trivialized the 2008 crisis as a
liquidity problem. Treating junk-mortgage loans as basically sound, the Fed
pretended that the economy could return to solvency by bailing out the banks.
The cover story was that low interest rates would enable banks to begin lending
again, with enough new debt leverage to bid up real estate prices so that
mortgage lenders could avoid taking a loss. Continued bubbling was promised to
make the mortgage crisis only temporary.
The Federal Reserve’s bank bailout of 2008-2016 is a classic example of
financial demagogy. The Fed pursued an easy-money policy for banks and their
bondholders, hoping to manipulate markets by injecting $4.3 trillion for banks to
buy reserves at interest rates of just a fraction of one percent (to 2016 and still
running). The aim was to enable banks to work their way out of insolvency by
making loans at a markup – that is, by making the economy even more debt-
heavy. In practice, the banks speculated in currencies, stocks and bonds, and lent
for corporate takeovers.
Quantitative Easing did not lead to new tangible capital investment and
hiring (“real” economic activity). Only the financial markets were inflated. The
Fed helped increase bank lending to inflate asset prices, not to revive
employment and wage levels. Scant attempt was made to write down the
economy’s debt burden.
Nearly free central bank credit helped the economy “borrow its way out of
debt,” by lending to families to bid housing prices back up. The pretense was
that reversing the decline in the valuation of real estate backing the mortgage
loans – and re-inflating prices for stocks and bonds – would revive the economy,
making it easier to carry the debt burden. The Federal Housing Authority, Fannie
Mae and Freddie Mac revived the home mortgage market by guaranteeing new
mortgage loans that absorbed up to an unprecedented 43% of borrowers’
income. This imposed debt deflation on such households, while banks became
the economy’s most profitable sector. Their stocks soared.
MYTH #14: Increasing the money supply inflates the general price level. This
makes debts easier to pay out of rising wages and incomes.
MYTH #15: Cutting real estate taxes makes housing less costly for
homeowners.
REALITY: Cutting property taxes raises the cost of housing, because whatever
rental income the tax collector relinquishes leaves more available to be pledged
to banks as interest. So if taxes are reduced by $1,000 a year, this amount of
rental value is “free” to be capitalized into a bank loan. At a 5% mortgage a
$1,000 annual tax cut will raise the mortgagee’s cost of a home by $20,000.
Sellers will gain – but buyers in the next generation will suffer.
This explains why the financial sector backs the real estate sector in
advocating lower property taxes. Banks end up with the tax cuts. This is
followed by a shift of the tax burden onto consumers, via sales taxes, and onto
local income taxes (from which absentee real estate investors are largely exempt.
It seems counter-intuitive that higher real estate taxes tend to lower the cost
of housing. But FIRE-sector sophistry claims that property tax cuts help
homebuyers, creating a cover story to distract attention from who actually ends
up with the economic rent.
MYTH #16: Higher real estate taxes make housing more costly, while cutting
these taxes helps make housing more affordable.
REALITY: The site value of land (mainly the rent of location) is set by market
conditions – the general level of prosperity, the desirability of living in
prestigious neighborhoods with good schools and parks, access to transportation,
and also the homeowner’s income and hence ability to pay, and capped by the
banks’ willingness to lend enough to outbid rival buyers.
The question is, how much of this rent should be paid as taxes and how much
remains available to be capitalized into bank loans. Whatever the property tax
collector relinquishes is available to be paid to the bankers. If property taxes are
increased, less rental value can be pledged to banks. They will not lend more to
increase property prices – and the government will be able to use this land rent
as the natural tax base.
GROUP #5:
Myths that the economy will achieve “balance” by
shrinking government
MYTH #17: Government budget deficits are bad, balanced budgets are good,
and budget surpluses even better!
REALITY: When governments run deficits (except for bailing out banks and
paying bondholders), they spend money into the economy. But if they run a
balanced budget (or even worse, a budget surplus), this sucks revenue out of the
economy. That is what happened when Andrew Jackson ran deflationary budget
surpluses in the 1830s after he closed down the Bank of the United States. It
happened again after the Civil War, when the United States sought to roll prices
back to pre-1860 levels, causing prolonged depression.
Calls for balanced budgets stem from the banking sector’s drive to replace
national treasuries as the source of money and credit. When President Bill
Clinton ran a budget surplus at the end of his administration in the late 1990s,
this obliged the American economy to rely on commercial banks to supply the
credit needed to grow. Unlike government spending that can be self-financed,
banks charge interest and fees for their credit creation – and create credit mainly
to bid up asset prices, not to spur employment and tangible capital formation.
MYTH #18: Cutbacks in public spending will bring the government’s budget
into balance, restoring stability.
MYTH #19: Providing social services freely or below cost “distorts” the self-
regulating market. All goods and services should be paid for by their users at
however much “the market” will bear. As Margaret Thatcher said, “there is no
such thing as society,” only the interests of asset owners and their bankers.
REALITY: Denying that society exists diverts attention from how financial
managers have taken over the economy, government and planning. Imposing the
libertarian fantasies of Margaret Thatcher and Ronald Reagan is largely
responsible for pricing Britain and America out of global markets and
deindustrializing their economies.
MYTH #20: Deregulating the financial sector will free it from paperwork and
enable it to pass the cost savings on to its customers.
REALITY: Markets tend to polarize between creditors and debtors, and between
property owners and users of basic infrastructure privatized from the public
domain. The volume of debt accumulates at compound interest, faster than the
“real” economy’s trends of output, income and hence the ability to pay debts.
Families, businesses and even governments are obliged to sell off their assets to
pay creditors, until property and its income are so concentrated that the economy
collapses or is conquered from without, or experiences a revolution from within.
(See Myth #7.) The great challenge is to free governments from control by the
rentier interests. This requires reality-based economic principles to guide tax and
regulatory policy. Turning the economy into an oligarchy is the price to be paid
for failing to counter the sophistry of financial predators promising that their
gains are those of the economy at large, not merely transfer payments from the
economy to themselves.
MYTH #22: The criterion of economic science is to demonstrate that
economies tend to return to stability and an increasingly fair and equitable
distribution of income and wealth. Models of polarization or atrophy have no
simplistic mathematical resolution, and hence fall outside the definition of
economic science proper.
REALITY: The financial and property sector seeks to control the educational
curriculum and popular media to discourage reform that would slow its
monopolization of wealth and political power. That is to be accomplished by
changing the meaning of economic vocabulary and eliminating the study of
economic history. The antidote to this junk economics must explain why
economies tend to become more unstable and more polarized as a result of their
own internal (“endogenous”) dynamics – above all, credit and debt dynamics,
and the untaxing of unearned economic rent.
Recovering from Misleading Economic Mythology
Today’s economics discipline is near collapse, awaiting a new paradigm.
Academic journals remain committed to the mythology of financialization and
its underbelly of rent seeking and privatization: the trickle-down idea that tax
favoritism for debt financing, the FIRE sector and high income brackets will
accelerate capital investment and raise living standards. There is a refusal to
acknowledge that most savings are lent out to increase the economy’s debt
burden, subjecting it to debt deflation after the initial flush of asset-price
inflation. That is why today’s distribution of wealth and income is polarizing
between creditors (the One Percent) and debtors (the 99 Percent).
Response to the devastation caused by living in this neoliberal illusion is
likely to follow the Kubler-Ross 5 stages of grief model for dealing with loss:
“In theory there is no difference between theory and practice. In practice there is.”
— “Yogi-ism,” attributed to Yogi Berra, among many others.
Lawyers have a saying: “When the facts are on your side, pound on the facts.
When the law is on your side, pound on the law. If you have neither, pound on
the table.”
Pounding is not enough, of course. The trick is to create an alternative
hypothesis to distract attention from the facts and the law. In economics the law
is the body of theory, its basic definitions and conceptual categories. The
relevant facts are statistics tracing the course of wealth and income, who owns
this wealth, how they obtain it, and who ends up owing how much to whom.
Distracting attention from these realities is a form of deception. That is what
experts are hired to do. In court cases each side produces its own advocates,
replete with academic credentials. In the sphere of economic policy, politicians
and the popular media trot out prize-winning experts to give the appearance of
respectability to arguments as to why taxes should be cut for the rich, why
governments should not regulate, and why they should sell off the public domain
to rent-extracting buyers.
When the facts do not back austerity, deregulation and a reversal of
progressive taxation, textbook writers say that reality is not a criterion of
economic validity. Much as in literary criticism, the discipline’s main criterion
for theoretical excellence is the internal consistency of assumptions, not reality.
That is what makes the theory of international trade “pure,” as if reality is an
impurity marring the beauty of abstract logic. The effect – indeed, the aim – is to
distract attention to an “as if” world.
What is at stake?
One future is for rentiers to privatize and deregulate economies. This travesty of
a classical free market ends up driving populations, industry and governments
into deepening debt, leading to global neofeudalism and debt peonage. The
increasingly financial sector’s implicit business plan is to achieve the same
predatory conquest of the land, natural resources and public infrastructure that
required military conquest a millennium ago. This is now happening all over the
world.
The alternative future is to create governments strong enough to save
economies from this conquest. The classical ideal was a mixed economy with
checks and balances to steer private gain seeking in keeping with the long-term
public interest. Freeing society from the rentier legacy of feudalism seemed well
on the way to being achieved by the late 19th century. Leading economists
backing democratic reform movements mobilized public opinion by describing
parasitic economic tendencies (and showing where taxes were least burdensome)
in ways that nearly everyone could understand. Today’s expurgation of the
history of economic thought and its classical vocabulary threatens to reverse that
understanding. The rentiers have sponsored a rewriting of history that is a
travesty of the moral principles and toolkit provided by the Enlightenment’s
classical political economists. Their tunnel vision and idealization of short-term
cut-and-run financial markets threatens economic and ecological collapse on an
unprecedented scale.
Does Economics Deserve a Nobel Prize?
(And, by the way, does Paul Samuelson
deserve one?)
This article was first published in Commonweal, Vol. 93 (Dec. 18, 1970)
pp. 296-98, on the occasion of Mr. Samuelson’s being awarded the second
annual Nobel Economics Prize (the Swedish National Bank's Prize in
Economic Sciences in Memory of Alfred Nobel) that year. My initial
optimism that a revolution would overthrow his theories obviously did not
bear fruit. I was teaching international trade theory at the Graduate Faculty
of the New School for Social Research at the time. Subsequently, I
criticized Mr. Samuelson’s methodology in “The Use and Abuse of
Mathematical Economics,” Journal of Economic Studies 27 (2000):292-
315. Most unrealistic of all is Mr. Samuelson’s factor-price equalization
theorem, whose misleading assumptions I survey in Trade, Development
and Foreign Debt: A History of Theories of Polarization v. Convergence in
the World Economy.
It is bad enough that the field of psychology has for so long been a non-social
science, viewing the motive forces of personality as deriving from internal
psychic experiences rather than from man’s interaction with his social setting.
Similarly in the field of economics: since its “utilitarian” revolution about a
century ago, this discipline has also abandoned its analysis of the objective
world and its political, economic productive relations in favor of more
introverted, utilitarian and welfare-oriented norms. Moral speculations
concerning mathematical psychics have come to displace the once-social science
of political economy.
To a large extent the discipline’s revolt against British classical political
economy was a reaction against Marxism, which represented the logical
culmination of classical Ricardian economics and its paramount emphasis on the
conditions of production. Following the counterrevolution, the motive force of
economic behavior came to be viewed as stemming from man’s wants rather
than from his productive capacities, organization of production, and the social
relations that followed therefrom. By the postwar period the anti-classical
revolution (curiously termed neoclassical by its participants) had carried the day.
Its major textbook of indoctrination was Paul Samuelson’s Economics.
Today, virtually all established economists are products of this anti-classical
revolution, which I myself am tempted to call a revolution against economic
analysis per se. The established practitioners of economics are uniformly
negligent of the social preconditions and consequences of man’s economic
activity. In this lies their shortcoming, as well as that of the newly-instituted
Economics Prize granted by the Swedish Academy: at least for the next decade it
must perforce remain a prize for non-economics, or at best superfluous
economics. Should it therefore be given at all?
This is only the second year in which the Economics prize has been awarded,
and the first time it has been granted to a single individual – Paul Samuelson –
described in the words of a jubilant New York Times editorial as “the world’s
greatest pure economic theorist.” And yet the body of doctrine that Samuelson
espouses is one of the major reasons why economics students enrolled in the
nation’s colleges have been declining in number. For they are, I am glad to say,
appalled at the irrelevant nature of the discipline as it is now taught, impatient
with its inability to describe the problems which plague the world in which they
live, and increasingly resentful of its explaining away the most apparent
problems which first attracted them to the subject.
The trouble with the Nobel Award is not so much its choice of man
(although I shall have more to say later as to the implications of the choice of
Samuelson), but its designation of economics as a scientific field worthy of
receiving a Nobel prize at all. In the prize committee’s words, Mr. Samuelson
received the award for the “scientific work through which he has developed
static and dynamic economic theory and actively contributed to raising the level
of analysis in economic science. . . .”
What is the nature of this science? Can it be “scientific” to promulgate
theories that do not describe economic reality as it unfolds in its historical
context, and which lead to economic imbalance when applied? Is economics
really an applied science at all? Of course it is implemented in practice, but with
a noteworthy lack of success in recent years on the part of all the major
economic schools, from the post-Keynesians to the monetarists.
In Mr. Samuelson’s case, for example, the trade policy that follows from his
theoretical doctrines is laissez faire. That this doctrine has been adopted by most
of the western world is obvious. That it has benefited the developed nations is
also apparent. However, its usefulness to less developed countries is doubtful,
for underlying it is a permanent justification of the status quo: let things alone
and everything will (tend to) come to “equilibrium.” Unfortunately, this concept
of equilibrium is probably the most perverse idea plaguing economics today, and
it is just this concept that Mr. Samuelson has done so much to popularize. For it
is all too often overlooked that when someone falls fiat on his face he is “in
equilibrium” just as much as when he is standing upright. Poverty as well as
wealth represents an equilibrium position. Everything that exists represents,
however fleetingly, some equilibrium – that is, some balance or product – of
forces.
Nowhere is the sterility of this equilibrium preconception more apparent than
in Mr. Samuelson’s famous factor-price equalization theorem, which states that
the natural tendency of the international economy is for his wages and profits
among nations to converge over time. As an empirical historical generality this
obviously is invalid. International wage levels and living standards are
diverging, not converging, so that the rich creditor nations are becoming richer
while poor debtor countries are becoming poorer – at an accelerating pace, to
boot. Capital transfers (international investment and “aid”) have, if anything,
aggravated the problem, largely because they have tended to buttress the
structural defects that impede progress in the poorer countries: obsolete systems
of land tenure, inadequate educational and labor-training institutions, pre-
capitalist aristocratic social structures, and so forth. Unfortunately, it is just such
political-economic factors that have been overlooked by Mr. Samuelson’s
theorizing (as they have been overlooked by the mainstream of academic
economists since political economy gave way to “economics” a century ago).
In this respect Mr. Samuelson’s theories can be described as beautiful watch
parts which, when assembled, make a watch that doesn’t tell time accurately.
The individual parts are perfect, but their interaction is somehow not. The parts
of this watch are the constituents of neoclassical theory that add up to an
inapplicable whole. They are a kit of conceptual tools ideally designed to correct
a world that doesn’t exist.
The problem is one of scope. Mr. Samuelson’s three volumes of economic
papers represent a myriad of applications of internally consistent (or what
economists call “elegant”) theories, but to what avail? The theories are static, the
world dynamic.
Ultimately, the problem resolves to a basic difference between economics
and the natural sciences. In the latter, the preconception of an ultimate symmetry
in nature has led to many revolutionary breakthroughs, from the Copernican
revolution in astronomy to the theory of the atom and its sub-particles, and
including the laws of thermodynamics, the periodic table of the elements, and
unified field theory. Economic activity is not characterized by a similar
underlying symmetry. It is more unbalanced. Independent variables or
exogenous shocks do not set in motion just-offsetting counter-movements, as
they would have to in order to bring about a meaningful new equilibrium. If they
did, there would be no economic growth at all in the world economy, no
difference between U.S. per capita productive powers and living standards and
those of Paraguay. Mr. Samuelson, however, is representative of the academic
mainstream today in imagining that economic forces tend to equalize productive
powers and personal incomes throughout the world except when impeded by the
disequilibrating “impurities” of government policy.
Empirical observation has long indicated that the historical evolution of
“free” market forces has increasingly favored the richer nations (those fortunate
enough to have benefited from an economic head start) and correspondingly
retarded the development of the laggard countries. It is precisely the existence of
political and institutional “impurities” such as foreign aid programs, deliberate
government employment policies, and related political actions that have tended
to counteract the “natural” course of economic history, by trying to maintain
some international equitability of economic development and to help
compensate for the economic dispersion caused by the disequilibrating “natural”
economy.
A Revolution
This decade will see a revolution that will overthrow these untenable theories.
Such revolutions in economic thought are not infrequent. Indeed, virtually all of
the leading economic postulates and “tools of the trade” have been developed in
the context of political-economic debates accompanying turning points in
economic history. Thus, for every theory put forth there has been a counter-
theory.
To a major extent these debates have concerned international trade and
payments. David Hume with the quantity theory of money, for instance, along
with Adam Smith and his “invisible hand” of self-interest, opposed the
mercantilist monetary and international financial theories that had been used to
defend England’s commercial restrictions in the eighteenth century. During
England’s Corn Law debates some years later, Malthus opposed Ricardo on
value and rent theory and its implications for the theory of comparative
advantage in international trade. Later, the American protectionists of the 19th
century opposed the Ricardians, urging that engineering coefficients and
productivity theory become the nexus of economic thought rather than the theory
of exchange, value and distribution. Still later, the Austrian School and Alfred
Marshall emerged to oppose classical political economy (particularly Marx)
from yet another vantage point, making consumption and utility the nexus of
their theorizing.
In the 1920s, Keynes opposed Bertil Ohlin and Jacques Rueff (among others)
as to the existence of structural limits to the ability of the traditional price and
income adjustment mechanisms to maintain “equilibrium,” or even economic
and social stability. The setting of this debate was the German reparations
problem. Today, a parallel debate is raging between the Structuralist School –
which flourishes mainly in Latin America and opposes austerity programs as a
viable plan for economic improvement of their countries – and the monetarist
and post-Keynesian schools defending the IMF’s austerity programs of balance-
of-payments adjustment. Finally, in yet another debate, Milton Friedman and his
monetarist school are opposing what is left of the Keynesians (including Paul
Samuelson) over whether monetary aggregates or interest rates and fiscal policy
are the decisive factors in economic activity.
In none of these debates do (or did) members of one school accept the
theories or even the underlying assumptions and postulates of the other. In this
respect the history of economic thought has not resembled that of physics,
medicine, or other natural sciences, in which a discovery is fairly rapidly and
universally acknowledged to be a contribution of new objective knowledge, and
in which political repercussions and its associated national self-interest are
almost entirely absent. In economics alone the irony is posed that two
contradictory theories may both qualify for prize worthy preeminence, and that
the prize may please one group of nations and displease another on theoretical
grounds.
Thus, if the Nobel prize could be awarded posthumously, both Ricardo and
Malthus, Marx and Marshall would no doubt qualify – just as both Paul
Samuelson and Milton Friedman were leading contenders for this year’s prize.
Who, on the other hand, can imagine the recipient of the physics or chemistry
prize holding a view not almost universally shared by his colleagues? (Within
the profession, of course, there may exist different schools of thought. But they
do not usually dispute the recognized positive contribution of their profession’s
Nobel prizewinner.) Who could review the history of these prizes and pick out a
great number of recipients whose contributions proved to be false trails or
stumbling blocks to theoretical progress rather than (in their day) breakthroughs?
The Swedish Royal Academy has therefore involved itself in a number of
inconsistencies in choosing Mr. Samuelson to receive the 1970 Economics Prize.
For one thing, last year’s prize was awarded to two mathematical economists
(Jan Tinbergen of Holland and Ragnar Frisch of Norway) for their translation of
other men’s economic theories into mathematical language, and in their
statistical testing of existing economic theory. This year’s prize, by contrast, was
awarded to a man whose theoretical contribution is essentially untestable by the
very nature of its “pure” assumptions, which are far too static ever to have the
world stop its dynamic evolution so that they may be “tested.” (This prompted
one of my colleagues to suggest that the next Economics Prize be awarded to
anyone capable of empirically testing any of Mr. Samuelson’s theorems.)
And precisely because economic “science” seems to be more akin to
“political science” than to natural science, the Economics Prize seems closer to
the Peace Prize than to the prize in chemistry. Deliberately or not, it represents
the Royal Swedish Academy’s endorsement or recognition of the political
influence of some economist in helping to defend some (presumably) laudable
government policy.
Could the prize therefore be given just as readily to a U.S. president, central
banker or some other non-academician as to a “pure” theorist (if such exists)?
Could it just as well be granted to David Rockefeller for taking the lead in
lowering the prime rate, or President Nixon for his acknowledged role in guiding
the world’s largest economy, or to Arthur Burns as chairman of the Federal
Reserve Board? If the issue is ultimately one of government policy, the answer
would seem to be affirmative.
Or is popularity perhaps to become the major criterion for winning the prize?
This year’s award must have been granted at least partially in recognition of Mr.
Samuelson’s Economics textbook, which has sold over two million copies since
1947 and thereby influenced the minds of a whole generation of – let us say it,
for it is certainly not all Mr. Samuelson’s fault – old fogeys. The book’s
orientation itself has impelled students away from further study of the subject
rather than attracting them to it. And yet if popularity and success in the
marketplace of economic fads (among those who have chosen to remain in the
discipline rather than seeking richer intellectual pastures elsewhere) is to become
a consideration, then the prize committee has done an injustice to Jacqueline
Susann in not awarding her this year’s literary prize.
To summarize, reality and relevance rather than “purity” and elegance are
the burning issues in economics today, political implications rather than
antiquarian geometrics. The fault therefore lies not with Mr. Samuelson but with
his discipline. Until it is agreed what economics is, or should be, it is as fruitless
to award a prize for “good economics” as to award an engineer who designed a
marvelous machine that either could not be built or whose purpose was
unexplained. The prize must thus fall to those still lost in the ivory corridors of
the past, reinforcing general equilibrium economics just as it is being pressed out
of favor by those striving to restore the discipline to its long-lost pedestal of
political economy.
HUDSON BUBBLE MODEL*
From Asset-Price Inflation to Debt-Strapped
Austerity
* For a more in-depth discussion see my book The Bubble And Beyond:
Fictitious Capital, Debt Deflation and Global Crisis (2013), Ch. 8: “The Real
Estate Bubble at the Core of Today’s Debt-Leveraged Economy,” and Ch. 11:
“Saving, Asset-Price Inflation and Debt Deflation.”
Today’s form of finance capitalism is an evolution (or detour) of industrial
capitalism into an economy dominated by large banks and money-management
institutions controlled by the One Percent. Its idea of “wealth creation” (indeed,
its business plan) is to inflate asset prices for real estate, stocks and bonds on
credit. This creates financial bubbles that leave borrowers and governments
debt-strapped, leading in due course to debt deflation.
The term “financialization” refers to the degree to which this debt leverage
rises as a proportion of asset valuations and, in the process, extracts a rising
proportion of national income. This increases the power of banks and the One
Percent over labor and industry in seven ways:
1. Inflating asset prices obliges buyers to take on more debt, increasing the
cost of home ownership and buying a retirement income, while creating
more “capital” gains for the One Percent.
2. Increasing debt is owed mainly to the One Percent, largely by the 99
Percent, including for education as the cost of schooling (like housing
prices) reflects how much banks are willing to lend to buyers.
3. Paying interest and carrying charges for mortgage debt, education debt,
credit-card debt and bank debt leaves less personal after-tax income
available to spend on goods and services, thereby slowing new investment
and employment.
4. Debt-leveraging of corporate balance sheets leads to insolvency, which
managers use as a threat to downsize pension obligations.
5. Financialization leading to a fiscal crisis as the tax deductibility of
interest (and similar subsidies for real estate) reduces federal and local tax
revenue. This forces a tax shift onto labor and consumers via higher sales
and excise taxes, higher income taxes, and cutbacks on social programs and
infrastructure spending. The fiscal squeeze leads to an underfunding or
elimination of pensions. (See Financialization.)
6. Paying public debts and financing budget deficits by selling off the
public domain turns user fees for hitherto public services into rent-
extraction opportunities. Privatization of public education is financialized
on credit with student loan debt, while health care and Social Security are
turned into profit opportunities instead of being financed out of the general
budget.
7. Non-prosecution of financial crime as the banking sector invests its gains
in buying control of the political process and election campaigns to back
client politicians. The resulting regulatory capture of public agencies is
accompanied by rewriting of bankruptcy laws (decriminalizing usury) to
favor creditors instead of enabling debtors to make a fresh start.
The result of these tendencies is that the center of social and economic planning
shifts from governments to Wall Street and other financial centers – under the
banner of “free markets.”
Fig.14
How financialization and the tax shift off the One Percent
strip the 99 Percent of its disposable personal income
Financializing home ownership, education, pensions and industry leaves less of
the family paycheck available for consumer spending after paying debt service
and suffering from taxes being shifted off the FIRE sector. The government
withholds a rising percentage of wages to pay FICA contributions for Social
Security and Medicare (now over 15% of paychecks) and federal and local
income taxes (up to about 20%). Instead of progressively taxing the One Percent,
taxes on wage earners are increased, along with sales taxes to close the budget
gaps caused by tax favoritism for the higher wealth and income brackets. What
is left to wage earners after paying these taxes is called disposable personal
income or DPI. (See the chart below for what is actually available as disposable
income, and for further discussion, see Disposable Personal Income in the A-
to-Z section of this book.)
Fig.15
National income statistics (see NIPA) define DPI as what wage earners take
home after deduction of taxes and FICA withholding. But what remains is not
fully disposable:
Housing charges. For starters, families must pay their monthly housing
“nut” to the bank for their mortgage, or to the landlord for rent. U.S. federal
housing programs guarantee bank mortgages that absorb up to 43% of the
homebuyer’s personal income, and rents in many areas have reached this
level.
Other debts. Payments on student loan debt, credit card debt, auto debt and
other debts (not to speak of payday loans) typically absorb over 10% of
consumer income.
Forced saving. After the 2008 financial crash many wage-earning
households were obliged to “save” by paying down their debt as banks
scaled back their lending and credit card exposure. Such quasi-saving is
squeezed out, not available for discretionary spending. The result is what
Richard Koo has called a balance sheet recession.
Insurance and pensions. Also taken off the top are payments for
compulsory health insurance, and in come cases non-government pension
plans and health care charges. Taken together, these charges leave only
between a quarter and a third of wage income disposable for spending on
goods and services. (See Wage-Earner DPI chart on opposite page.)
A tax shift off the One Percent onto the 99 Percent. Household income
does not get the same tax breaks afforded to businesses. Businesses deduct
payroll and all other operating costs and depreciation, as well as taxes and
interest from their taxable income. Wage earners have analogous basic
expenses but receive no such tax favoritism. If income-tax policy treated
labor like capital, only this net after-expense income would be taxed, not
the entire wage. Yet many Americans are in favor of cutting taxes without
realizing that this usually means cuts overwhelmingly for the One Percent.
Inequality of “total returns” between families and businesses. Just as
businesses measure “total returns” to include the rise (or decline) in the
market price of homes and financial securities, consumers and wage earners
should have a parallel measure. This would show the decline in their net
worth (and hence, spending power) after prices for homes fell after 2008.
That decline toward negative equity offsets the gains that many homebuyers
imagined they were obtaining when they rode the Bubble Economy’s rising
wave of debt-inflated housing prices.
While corporate lobbyists promise that lower taxes will lead to more investment
and hiring, this is merely a myth to lull voters into a trickle-down fantasy (an
economic Stockholm Syndrome). When companies adopt financial engineering
rather than industrial engineering, rolling back corporate taxes (or taking profits
in offshore tax-avoidance centers) simply leaves more revenue available for
share buybacks, dividend payouts and management bonuses.
The counterpart to tracing how FIRE-sector charges and taxes eat into
household income is the diversion of corporate cash flow – ebitda – to pay the
FIRE sector (see Business Cash Flow (ebitda) to Pay the FIRE Sector chart
below).
Fig.16
To help ensure that the aim of corporate managers will be to engineer asset-price
gains (called “creating shareholder value”), they are rewarded with stock options
and bonuses based on how much they push up the price of their shares. This
prompts companies to use their profits for stock buybacks and higher dividend
payouts instead of re-investing to expand their business. An enormous 92% of
corporate cash flow in 2014 was paid out as dividends or used for share
buybacks. Higher asset prices also are achieved by cutting costs – eliminating
staff and product lines, and downsizing pension plans and employer
contributions to healthcare.
What kept Western economies expanding in the decades leading up to the 2008
crash was mainly the third option: bank lending to infuse purchasing power.
However, this merely financial mode of “wealth creation” has its own internal
contradiction. Leaving this expansion of credit in the hands of bankers and
bondholders comes at a price: interest charges. The debt overhead grows by the
mathematics of compound interest, to the point where it exceeds the ability of
households, business and governments to pay.
Furthermore, banks create money mainly to lend against assets in place (real
estate, corporate takeovers and privatization of public infrastructure
monopolies), not to fund new tangible capital investment and hiring. The result
of such lending is to bid up asset prices. Today’s investors aim at “total returns,”
defined as current income plus asset-price gains. For real estate and the stock
and bond markets since 1980, asset-price gains have far exceeded current
income. This increasing role of asset-price inflation has transformed finance
capitalism away from promoting industry and employment to a strategy of
financial engineering. Yet these gains do not appear in any national accounts to
show why the Bubble Economy has widened inequality so sharply – and so
rapidly.
When credit is extractive, rising debt levels impoverish real estate, public
infrastructure and industry. That is what is causing today’s austerity. The more
debt service and other rentier income is extracted, the higher the probability of
default, ending in a crash that leaves a residue of debt deflation. Foreclosures
ensue, transferring assets to creditors – unless the loans are resolved by debt
writedowns, bankruptcy and Clean Slates.
Austerity caused by financialization thus exploits labor not only as wage
earners and consumers, but also as debtors and even as forced savers (via
pension fund capitalism and Social Security contributions used to cut taxes on
the FIRE sector and the One Percent). The current rent and financial dynamic
that has led to austerity was first described in Volumes II and III of Karl Marx’s
Capital (see Rent Theory). Interest-bearing credit, he explained, has its own
mathematical dynamic of compound interest, external to the industrial economy
of production and consumption.
Most classical economic reformers of the mid to late 19th century
optimistically expected capitalism to prepare the ground for socialism and a
better living standard by freeing economies from the faux frais (unnecessary
expenses) of production in the form of interest, land rent and other forms of
monopoly rent (see Monopoly). The task of industrial capitalism seemed
logically to be to make banking productive instead of usurious and predatory,
mainly by democratic parliamentary reform. Industrial capitalism’s drive for
efficiency and cost-cutting was expected to lead to “socialism” in one form or
another as democratic governments would tax away land rent and unearned
financial returns, and nationalize basic infrastructure and natural monopolies to
finally free society from the legacy of feudalism.
However, bankers, landlords and other vested interests did not remain
passive in the face of this Progressive Era drive. Seeking to morally justify their
“free lunch,” they fought back to sponsor a pro-rentier ideology that depicts rent
and interest (and capital gains) as being productively earned, as if their recipients
contribute to economic growth rather than burdening society with an extractive
overhead.
That ideological rollback has now become mainstream. Today’s national
income statistics avoid reporting the unearned income that was a central focus
for classical political economy. This state of denial has shielded rentier wealth
and power from criticism. The Bubble Economy leading up to 2008 was
applauded as a boom, as if its business model was making economies rich and
enabling them to pay pensions out of purely financial engineering instead of
paying current income to retirees.
The Bubble Economy’s sponsors called it the Great Moderation, oblivious to
the mounting debt. What was moderate was simply the lack of protest among
mainstream economists, media and politicians. Federal Reserve chairman Alan
Greenspan assured voters that the economy was getting richer by debt leveraging
to bid up the prices that people had to pay for homes. Those who said that the
financial emperor had no clothes were ignored, as if they simply failed to
understand how the rising tide of debt was lifting all yachts, not submerging the
economy around them. This financial game plan goes far beyond the scope of
what mainstream textbooks describe. It seeks government subsidy and tax
favoritism (see Socialism for the Rich), while preventing governments from
issuing their own money (leaving this function to commercial banks) and
privatizing basic infrastructure for creditors and the buyers they finance. Seeing
credit and debt creation as the main lever to obtain property income, financial
lobbyists realize that housing and corporate ownership can be left nominally in
non-financial hands as long as the middle class and business owners pay all of
their disposable income to the banks and the bondholders who finance them.
The reason why the economy has polarized between the One Percent and the
99 Percent is thus largely financial. Nearly all growth in income and wealth has
been sucked up to the top of the economic pyramid. Most economists treat this
narrowly monopolized growth as if the economy at large is growing, but the
financial business plan involves diverting income away from tangible capital
formation, shrinking the economy.
The result is that instead of helping nations undersell competitors by
minimizing the cost of living and doing business, financialization adds to costs
in two ways:
1. Interest and financial charges are built into the break-even costs of
living and doing business. On a deeper level, financial bubbles inflate
asset prices on credit (debt leveraging), while shifting political power to the
rentier class whose aim – the unearned increment – is the opposite of what
19th-century democratic reformers intended.
2. The tax burden is shifted onto labor and industry by the regressive VAT
tax (“value added” taxes on each stage of production, passed on to
consumers), sales taxes and a flat (low) income tax. The alternative would
be to tax land and make banking and natural monopolies into public
utilities. Social Security and health care are treated as user fees that are pre-
paid by wage earners instead of financed by pay-as-you-go progressive
taxation (so much for the “entitlement” fiction). To cap matters, privatizing
the creation of money and credit blocks governments from self-financing
their budget deficits. Insistence that governments should not run such
deficits (and urging them actually to pay down the public debt) forces
economies to rely on banks for the credit needed to grow.
As the world has suffered since 2008, this favoritism toward the FIRE sector
leads to a fiscal and financial crisis. Neoliberal economic theory – epitomized by
the Eurozone’s financial demands on Greece – urges that pensions and public
services be scaled back, and that the resulting austerity and fiscal shortfalls be
resolved by privatizing natural resources and public infrastructure that can be
turned into rent-extracting monopolies.
Instead of public investment to lower the economy’s cost structure,
privatized transportation and communications, water and other key utilities
already in place provide opportunities for banks to lend even more.
Financializing education with student loan programs, for instance, requires
prospective graduates to go deeply into debt to banks to pay for training to
obtain work. Meanwhile, the content of economics education is turned into junk
economics depicting this post-industrial finance capitalism as being the natural
“end of history,” as if there is no practical alternative going forward (see TINA).
Austerity for labor/consumers, downsizing of industry and privatization of the
public infrastructure – including public health, pensions, Social Security, and the
banking and credit system – is depicted as inevitable, not as a hijacking of
economic potential.
The feeling of inevitability relies on a censorship of the history of economic
thought, and of economic history. That intellectual degradation provides the
protective shell for financial exploitation of labor and industry, effectively
eliminating the lessons of history.
Any long-term analysis of how economies evolve must recognize this
misshaping of academic understanding and its corollary statistical
representations of reality. Economic theory can play either a productive or
regressive role. What is important to recognize is that each economic class
promotes its own worldview. The resulting conflation of subjective self-interest
with objective reality makes the economics discipline unscientific and prone to
sophism. Today’s mainstream worldview is that of financial rentiers, not
industry or labor. Given today’s official financial policy of monopolizing all
economic growth for rentiers atop the economic pyramid, any realistic model of
the economy must recognize that society does not always progress forward. It
can retrogress. That is what the world has been seeing for the past generation
and, at present, that looks like our foreseeable future.
Author Interview:
KILLING THE HOST BY MICHAEL
HUDSON
The following interview with Michael Hudson by Eric Draitser was aired on
CounterPunch Radio, Episode 19, September 21, 2015.1 This transcript has been
edited for clarity.
ERIC DRAITSER (ED): Today I have the privilege of introducing Michael
Hudson to the program. Doctor Hudson is the author of the new book Killing the
Host: How Financial Parasites and Debt Bondage Destroy the Global Economy,
available in print on Amazon and an eversion on CounterPunch.
Michael Hudson, welcome to CounterPunch Radio. As I mentioned already,
the title of your book, Killing the Host, is an apt metaphor. You explain that
parasitic finance capital survives by feeding off what you call the real economy.
Could you draw out that analogy a bit? How does finance behave like a parasite
toward the rest of the economy?
MICHAEL HUDSON (MH): Economists for the last 50 years have used the
term “host economy” for a country that lets in foreign investment. The word
“host” implies a parasite. The term parasitism has long been applied to finance
by Martin Luther and others in the sense of simply taking something from the
host.
But in nature, biological parasitism works in a more complex and
sophisticated way. The key is how a parasite takes over a host. It has enzymes
that numb the host’s nervous system and brain. So when it stings or gets its
claws into the host, there’s a soporific anesthetic to block it from realizing that
it’s being taken over. The parasite then sends enzymes into the host’s brain to
control its behavior.
A parasite cannot take anything from the host unless it takes over the brain.
The brain in modern economies is the government, the educational system, and
the way that society makes economic policy for how to behave.
In nature the parasite makes the host think that the free rider, the parasite, is
its baby, part of its body. Its aim is to convince the host to protect the parasite
over itself. That’s how the financial sector has taken over the economy. Its
lobbyists and client academics persuade governments and voters that they need
to protect banks, and even need to bail them out when they become overly
predatory and face collapse. Politicians are persuaded to save banks instead of
saving the economy. It is as if the economy can’t function without banks being
left in private hands to do whatever they want, free of serious regulation and
even from prosecution when they commit fraud. This worldview saves creditors
– the One Percent – not the indebted 99 Percent.
It was not always this way. A century ago, two centuries ago, three centuries
ago and all the way back to the Bronze Age, almost every society saw finance –
that is, debt – as the great destabilizing force. Debt grows exponentially,
ultimately enabling creditors to foreclose on the assets of debtors. Creditors end
up reducing societies to debt bondage. That is how the Roman Empire ended in
serfdom.
About a hundred years ago in America, John Bates Clark and other pro-
financial ideologues argued that finance is not external to the economy. They
said that it’s not extraneous, it’s part of the economy, just like landlords claim to
be part of the economy’s production process, not an overlay to it. This implies
that when the financial sector takes more revenue out of the economy as interest,
fees or monopoly charges, it’s not merely siphoning it off this revenue from
producers; it’s because Wall Street and the One Percent are an inherent and vital
part of the economy, adding to GDP. So our economic policy protects finance as
if it helps us grow instead of siphoning off our growth.
A year or two ago, Lloyd Blankfein of Goldman Sachs said that the reason
his firm’s managers are paid more than anybody else is because they’re so
productive. The question is, productive of what? The National Income and
Product Accounts (NIPA) say that everybody is productive in proportion to the
amount of money they make or take. It doesn’t matter whether it’s extractive
income or productive income. It doesn’t matter whether it’s made by
manufacturing products or simply by taking money from people via the kinds of
fraud for which Goldman Sachs, Citigroup, Bank of America and others paid
tens of millions of dollars in fines for committing. Any way of earning income is
considered to be as productive as any other way.
This is a parasite-friendly mentality, because it denies that there’s any such
thing as unearned income. It denies that there’s a free lunch. Hence, there seems
to be no such thing as economic parasitism. Milton Friedman got famous for
promoting this idea that there’s no such thing as a free lunch, but Wall Street
knows quite well that from its perspective, the economy is all about how to get a
free lunch – and how to get the risks picked up by the government. No wonder
they back economists who deny that there’s any exploitation, or any such thing
as unearned income!
ED: To get to the root of the issue, what’s interesting to me about this analogy is
that we hear the term neoliberalism all the time. It is an ideology that’s used to
promote the environment in which this parasitic sort of finance capital can
operate. Could you talk a bit about the relationship between finance capital and
neoliberalism as its ideology?
MH: Today’s vocabulary is what Orwell would call Doublethink. If you’re
going to erase the memory of what Adam Smith, John Stuart Mill and other
classical economists described as free markets – markets free of rentier income –
you claim to be neoliberal, misrepresenting these reformers as endorsing today’s
anti-classical “freedom” from taxation for rentiers. This inversion of classical
liberalism requires a rewriting of the history of economic thought to suppress the
19th-century distinction between earned and unearned income – that is, between
real wealth and mere overhead.
The parasite’s strategy is to replace the meaning of everyday words with
their opposite. It’s Doublethink. This rewriting of the history of economic
thought involves inverting the common vocabulary that people use. The focus of
Smith, Mill, Quesnay and the whole of 19th-century classical economics was to
distinguish between productive and unproductive labor – that is, between people
who earn wages and profits, and rentiers who, as Mill said, “get rich in their
sleep.” That is how he described landowners receiving groundrent and rising
land prices over time. It also describes the financial sector receiving interest and
“capital” gains.
The first thing the neoliberal Chicago School did when they took over Chile
was to close down every economics department in the country except the one
they controlled at the Catholic University. They started an assassination program
of left wing professors, labor leaders and politicians, and imposed neoliberalism
at gunpoint. Their breakthrough idea was you cannot have deregulated “free
markets” stripping away social protections and benefits unless you have
totalitarian control. You have to censor any idea that there’s ever been an
alternative, by rewriting economic history to deny the progressive tax and
regulatory reforms that Smith, Mill, and other classical economists urged. You
have to reject the classical economists’ guiding objective: to free industrial
capitalism from the surviving feudal privileges of landlords and predatory
finance.
Books
(available on Amazon.com)
The Lost Tradition of Biblical Debt Cancellations (forthcoming full-length book
2017) Absentee Ownership and its Discontents: Critical Essays on the Legacy of
Thorstein Veblen (2016), edited with Ahmet Öncü Killing the Host: How
Financial Parasites and Debt Destroy the Global Economy (2015) Finance As
Warfare (2015)
The Bubble and Beyond: Fictitious Capital, Debt Deflation and Global Crisis
(2012) Finance Capitalism and Its Discontents: Interviews and Speeches 2003-
2012 (2012)
America’s Protectionist Takeoff 1815-1914: The Neglected American School of
Political Economy (New Edition 2010) Trade, Development and Foreign Debt:
How Trade and Development Concentrate Economic Power in the Hands of
Dominant Nations (New Edition 2009) Global Fracture: The New International
Economic Order (New Edition 2005)
Super Imperialism: The Origin and Fundamentals of U.S. World Domination
(New Edition 2003) A Philosophy for a Fair Society (1994), edited with G.J.
Miller and Kris Feder
Canada in the New Monetary Order: Borrow? Devalue? Restructure? (1978) –
Reprint
The Myth of Aid: The Hidden Agenda of the Development Reports (with Dennis
Goulet) (1971) – Reprint.
1. “The $4.7 trillion Pyramid: Why Social Security Won’t Be Enough to Save
Wall Street,” Harper’s, April 2005, pp. 35-40.
2. William K. Black, “Control Fraud and the Irish Banking Crisis,” New
Economic Perspectives, June 12, 2011.
link).
3. “The New Road to Serfdom: An illustrated guide to the coming real estate
collapse,” Harper’s, May 2006, pp. 39-46. Both Harper’s articles are reprinted
in The Bubble and Beyond, along with the model of how the Bubble Economy
was being financialized, which I presented in Kansas City at its Eighth
International Post-Keynesian Workshop in June 2004 (“Saving, asset-price
inflation and debt-induced deflation,” published in 2006).
4. “The Use and Abuse of Mathematical Economics,” Journal of Economic
Studies 27 (2000), pp. 292-31.
5. Finance as Warfare (World Economics Association, 2015).
6. “Does Economics Deserve a Nobel Prize?” Commonweal 93 (December 18,
1970).
Introduction
1. For details see Michael Hudson and Cornelia Wunsch, eds., Creating
Economic Order: Record-keeping, Standardization, and the Development of
Accounting in the Ancient Near East (2004).
2. See Paul K. Piff, “Wealth and the Inflated Self: Class, Entitlement, and
Narcissism,” Personality and Social Psychology Bulletin 40 (2014), pp. 34–43,
and also Paul K. Piff, Daniel M. Stancato, Stéphane Côté, Rodolfo Mendoza-
Denton and Dacher Keltner, “Higher social class predicts increased unethical
behavior,” PNAS (Proceedings of the National Academy of Sciences of the
United States of America), 2012. (link) 3. Quoted in Gaius Publius, “Money uses
money to neuter Democrats and enable Republicans,” Down With Tyranny,
January 25, 2016. (link) 4. Bill Black, “Wall Street Declares War Against Bernie
Sanders,” New Economic Perspectives, January 25, 2016, citing Benjamin I.
Page, Larry M. Bartels, and Jason Seawright, “Democracy and the Policy
Preferences of Wealthy Americans,” Perspectives on Politics, March 2013 (Vol.
11, #1), pp. 51-73. (link) 5. U.S. Labor Secretary Jacob Schoenhof, Wages and
Trade in Manufacturing Industries in America and in Europe (New York, 1884),
p. 19. I provide a detailed analysis of the American School in America’s
Protectionist Takeoff: 1815-1914.
B
1. See Michael Hudson and Cornelia Wunsch, eds., Creating Economic Order:
Record-Keeping, Standardization and the Development of Accounting in the
Ancient Near East (Bethesda, 2004).
2. The French Jesuit Abbot Augustin Barruel wrote in his Memoirs, Illustrating
the History of Jacobinism (1789) that the French Revolution resulted from the
efforts of three groups “atheists, Encyclopaedists and Économistes.” But a
century later the economic reformer and journalist Henry George derided
economics as “a science which…seems but to justify injustice, to canonize
selfishness by throwing around it the halo of utility.” (Science of Political
Economy [1898], p. 6).
3. Manuela Cadelli, “Neoliberalism is a species of fascism,” Defend Democracy
Press, July 11, 2016. (link) 4. I review the false assumptions of such theorizing
in detail in my Trade, Development and Foreign Debt (2009).
5. Nassau Senior, “The Relief of Irish Distress,” Edinburgh Review, January
1849.
6. Steve Keen, “Olivier Blanchard, Equilibrium, Complexity, And The Future Of
Macroeconomics,” Forbes. October 4, 2016. (link).
F
1. I give the historical details in “How the U.S. Treasury avoided Chronic
Deflation by Relinquishing Monetary Control to Wall Street,” Economic &
Political Weekly (India), June 2016.
2. Quoted in Ron Chernow, The Warburgs: The Twentieth-Century Odyssey of a
Remarkable Jewish Family (Vintage [Kindle Locations 4558-4561]).
3. Frederick Soddy, Wealth, Virtual Wealth and Debt. The solution of the
economic paradox (George Allen & Unwin, 1926).
4. Joe Nocera, “Sheila Bair’s Bank Shot,” The New York Times Magazine: July
10, 2011. This was the interview she gave upon stepping down from the FDIC.
5. Bertrand Russell, Freedom and Organisation (1934, chapter 19, p. 186).
6. CNBC interview, January 11, 2011. “Giving debt relief to people that really
need it, that’s what foreclosure is.” (link)
G
1. Henry George, Progress and Poverty ([1879] (New York: 1981, pp. 39f.):
“Increase in land values does not represent increase in the common wealth, for
what landowners gain by higher prices, the tenants or purchasers who must pay
them will lose.” The result is a zero-sum transfer of wealth and income. See also
the Science of Political Economy (New York, 1980, pp. 259-63, first published
posthumously in 1898).
2. The British aristocracy still owns a third of all land area (mainly rural) in the
U.K. See Tamara Cohen, “Look who owns Britain: A third of the country STILL
belongs to the aristocracy,” Daily Mail, November 10, 2010. The largest
hereditary holding is the Kensington area of London, whose value reflects the
general level of prosperity and rent-of-location from public infrastructure and
neighborhood.
H
1. See my Debt and Economic Renewal in the Ancient Near East (ed. with Marc
Van De Mieroop) (CDL Press, Bethesda, 2002).
2. Marx, “Afterword” to the 2nd German edition of Capital (Vol. I, [1873],
London, 1954), p. 25.
3. See e.g. Sewell Chan, “Greenspan Criticized for Characterization of
Colleague,” The New York Times, April 10, 2010. (link)
L
1. I survey the emergence and evolution of land tenure in the Neolithic and
Bronze Age in Labor in the Ancient World (ed. with Piotr Steinkeller, ISLET,
2015) and Urbanization and Land Ownership in the Ancient Near East (ed. with
Baruch Levine, Cambridge, Mass: Peabody Museum, Harvard, 1999).
2. Herman Kahn, “The Expert and Educated Incapacity,” World Economic
Development: 1979 and Beyond (Westview Press, 1979) pp. 482-484.
M
1. Jon Hellevig, “Russian Economy – The disease is not Dutch but Liberal,”
Awara, (link) March 2, 2016, reprinted in Johnson’s Russia List, March 3, 2016,
#12. (link) 2. Paul Samuelson, “The Gains from Trade,” Canadian Journal of
Economics and Political Science 5 (1939), p. 205.
3. William Vickrey, Microeconomics (McGraw Hill, 1964), p. 5.
O
1. John C. Michaelson, “The High Costs of Very Low Interest Rates,” Wall
Street Journal, August 11, 2010.
R
1. See for instance Karl Marx’s speech to the Chartists, as well as Terence
McCarthy’s introduction to Marx’s History of Economic Theories (New York
1952, his title for Theories of Surplus Value), p. xvi: “Marx, in many of his basic
precepts, was the last great member of the Manchester School of Thought,” the
free marketers of his day who spearheaded repeal of Britain’s Corn Laws in
1846.
2. Ibid., p. xi; McCarthy adds that Marx castigated bureaucrats and civil servants
“as parasites and unproductive laborers … [and] shared the lathing for waste,
inefficiency and parasitism voiced by most of the progressive capitalists and
economic theoreticians of the time he studied.”
3. Plato, Republic, 331c-d. The term for justice is dīkaiosyne, meaning “right
behavior,” from dīke, cognate to dexterous. I am indebted to Moritz Hinsch of
Berlin for drawing my attention to this passage, in his paper on “Private Debts in
Classical Greece,” delivered to the international conference on “Debt: The First
3500 Years” in Tübingen, Germany, June 11, 2016.
4. See the articles collected in L. Randall Wray, ed., Credit and State Theories of
Money: The Contributions of A. Mitchell Innes (Edward Elgar, 2004).
5. “How Interest Rates Were Set, 2500 BC - 1000 AD: Máš, tokos and fænus as
metaphors for interest accruals,” Journal of the Economic and Social History of
the Orient 43 (Spring 2000), pp. 132-161.
T
1. David Graeber, Debt: The First 5,000 Years (Brooklyn, New York, 2011), pp.
50, 55, 344 and 358.
2. For a discussion of how markets were shaped by administered pricing, see my
afore-mentioned Creating Economic Order: Record-Keeping, Standardization
and the Development of Accounting in the Ancient Near East (ed. with Cornelia
Wunsch, Bethesda, 2004). Polanyi’s approach is summarized in Karl Polanyi,
Conrad M. Arensberg and Harry W. Pearson, Trade and Markets in the Early
Empires (1957). See also Johannes Renger (1979), “Interaction of Temple,
Palace, and ‘Private Enterprise’ in the Old Babylonian Economy,” in Eduard
Lipinski (ed.), State and Temple Economy in the Ancient Near East (Leuven,
1979): I, pp. 249-56, and his “Patterns of Non-Institutional Trade and Non-
Commercial Exchange in Ancient Mesopotamia at the Beginning of the Second
Millennium BC,” in Alphonse Archi, ed., Circulation of Goods in Non-Palatial
Context in the Ancient Near East (Rome, 1984), pp. 31-115. I contrast Polanyi’s
distinction between the reciprocity of gift exchange, redistributive markets via
administered pricing and price-making markets with Marx’s focus on modes of
production in my review of surveys of Polanyi’s work in Archiv für
Orientforschung 51 (2005/2006), pp. 405-11.
3. Branko Milanovic, “Why We All Care About Inequality (But Are Loath to
Admit It),” 2 Challenge, vol. 50, no. 6, November–December 2007. (link) 4.
Thorstein Veblen, Absentee Ownership and Business Enterprise in Recent Times
(1923), pp. 142ff.
5. “Il est défendu de tuer; tout meurtrier est puni, à moins qu’il n’ait tué en
grande compagnie, et au son des trompettes; c’est la règle.” Dictionnaire
philosophique (Geneva, 1764), under Droit.
6. Robert Andelson (ed.), Commons without Tragedy (1991).
7. I describe the details in Finance Capitalism and its Discontents (ISLET 2012),
chapter 9: “An insider spills the beans on offshore banking centers,” pp. 135-
156.
8 Testimony of Chairman Alan Greenspan before the Committee on Banking,
Housing, and Urban Affairs, U.S. Senate July 22, 1997: “The Federal Reserve’s
semiannual monetary policy,” (link) 9. I give the background in “How the U.S.
Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall
Street,” Economic & Political Weekly (India), May 7, 2016.
10. See Dirk Bezemer and Michael Hudson, “Finance Is Not the Economy:
Reviving the Conceptual Distinction,” Journal of Economic Ideas, September
2016. See also my book, The Bubble And Beyond: Fictitious Capital, Debt
Deflation and Global Crisis. 2014: Chapter 11, “Saving, Asset-Price Inflation
and Debt Deflation,” pp. 297-318.
V
1. Frederick Soddy, Wealth, Virtual Wealth and Debt: The solution of the
economic paradox. George Allen & Unwin, 1926.
22 Myths
1. (link)
A-TO-Z VOCABULARY GUIDE
INDEX
A
Accounting
Adam Smith (1723-1790)
Affluence
Affluenza
Agio (a money-changing fee)
Alienation
American School of Political Economy Apex Predator
“As If” Argument
Asset-Price Inflation
Asset Stripping
Austerity
Austrian School of Economics
B
Bad Debt
Bailout
Balance of Payments
Balance Sheet
Balance Sheet Recession
Balanced Budget
Bankruptcy
Banks, Bankers, Banking: See Finance Capitalism; Financialization;
and FIRE Sector Bankster
Banksterism
Barter
Big Government
Blair, Tony (1953-)
Blame the Victim
Bond
Bourgeoisie
Bubble
Bubble Economy
Bubble Illusion
Business Cycle
C
Capital
Capital Flight
Capital Formation
Capital Gain
Capitalism
Capitalism, Casino: See Casino Capitalism Capitalism, Crony: See
Public-Private Partnership Capitalism, Finance: See Finance
Capitalism Capitalism, Money Manager: See Money Manager
Capitalism Capitalism, Pension Fund: See Pension Fund Capitalism
Capitalism, Pentagon: See Pentagon Capitalism Cash Flow Casino
Capitalism
Causality
Central Bank
Central Bank Reserves
Chartalism
Chicago Boys
Chicago School
Choice
Circular Flow
Clark, John Bates (1847-1938)
Clash of Civilizations
Class
Class Consciousness
Class Struggle
Classical Political Economy
Clean Slate (AKA debt forgiveness) Client Academics
Client Oligarchy
Cognitive Dissonance
Colonialism
Commons
Company
Compound Interest
Conditionalities
Conservatives
Consumer
Consumer Demand
Consumer Price Index (CPI)
Corporation (Limited Liability Company, LLC) Corvée Labor
Cost: See Value, 241; contrasted with Economic Rent Creative
Destruction
Credit
Crime
Crime, Financial: See Too Big To Fail/Jail Criminal
Crony Capitalism: See Privatization and Public-Private Partnership
D
Debt
Debt Cancellation/Clean Slate
Debt Crisis
Debt Deflation
Debt Dependency
Debt Drag
Debt Leveraging
Debt Overhead
Debt Peonage
Debt Pollution
“Debts that can’t be paid, won’t be”
Decline of the West
Decontextualization
Deflation
Demagogy
Democracy
Democratization of Credit
Denial
Dependency
Depreciation
Deregulation
Derivatives
Diminishing Returns
Discretionary Income
Dismal Science
Disposable Personal Income (DPI)
Dollar Hegemony
Dollar Standard
Doublespeak
Doubling Time
Dutch Disease
Dutch Finance
Dystopia
E
Ebitda
Earned Income
Economic Forecasting
Economic Miracle
Economic Rent
Economics
Economist
Education
Efficient Market Hypothesis
End Of History
End Time
Enlightenment
Environment
Equilibrium
Errors and Omissions
Euphemism
European Central Bank (ECB)
“Euthanasia of the rentier”
Exploitation
Exponential functions: See Compound Interest; Doubling Time; and
Rule of 72
Externality
Extractive Economy
Extremist
F
Factoid
Factor of Production
Failed State
Fallacy, Economic
Falling Rate of Profit
False Correlation
Federal Reserve System (the Fed)
Feudalism
FICA (Federal Insurance Contributions Act) Fictitious Capital
Fictitious Costs
Fiduciary Responsibility
Finance Capitalism
Financial Engineering
Financialization
FIRE Sector
Fiscal Surplus (AKA Fiscal Drag)
Flat Tax
Forced Saving
Foreclosure
Fragility
Free Lunch
Free Market
Free Trade
Friedman, Milton (1912-2006)
G
George, Henry (1839-1897)
German Economic Miracle
GIGO (Garbage In, Garbage Out)
GINI Coefficient
Gold
Government
Grabitization
Great Moderation
Greed
Greenspan, Alan (1926-)
Groundrent
H
Half-life
Have-nots
Haves
Henry George Theorem
Host Economy
Hubris
Hudson Bubble Model
Hyperinflation
Hypocognizant
I
Ideology
Idiot Savant
Ignorance
IMF Riots
Immiseration
Impatience
Imperialism
Implanted Memory
Increasing Returns
Independence
Individualism
Inflation
Inner Contradiction
Innocent Fraud
Insanity
Institutionalism
Insurance, Insurers: See FIRE Sector Interest
Interest, compound: See Compound Interest Interest, mortgage
Investment
Investor
Invisible Hand
“It’s not what you make, it’s what you net”
J
Jubilee Year
Junk Bonds
Junk Economics
Junk Mortgage
Just Price
K
Keynes, John Maynard (1883-1946)
Kleptocrat
L
Labor Capitalism
Labor Theory of Value
Laffer Curve
Laissez Faire
Land
Landlord
Land Rent contrasted to Monopoly Rent: See Monopoly Rent
contrasted to Land Rent Land Value Tax (LVT, AKA Land Valuation Tax)
Law of Unintended Consequences
Learned Ignorance
Liberal
Liberal Democracy: See End Of History Libertarian
Liberty Bell
Liquidate
Liquidity
Liquidity Trap
Lobbyist
Locke, John (1632-1704)
M
Makers and Takers
Malthus, Thomas Robert (1766-1834) Marginalism
Marginal Utility Theory
Market Bolshevism
Market Economy
Market Fundamentalism
Market Price
Market Socialism
Market: See “The Market”
Mark-to-Model Accounting
Marx, Karl (1818-1883)
Marxism
Mathiness
Menger, Carl (1840-1921)
Middle Class
Military Junta
Military Spending
Mill, John Stuart (1806-1873)
Minsky, Hyman (1919-1996)
“Miracle of Compound Interest, The” (illustration) Mixed Economy
Modern Monetary Theory (MMT)
Modernization
Monetarism
Money
Money Illusion
Money Manager
Money Manager Capitalism
Monopoly
Monopoly Rent contrasted to Land Rent Moral Hazard
Murabaha Loan
N
N
National Income and Product Accounts (NIPA) Natural Monopolies: See
Monopoly, 160; Public Domain; and Commons Neoclassical Economics
Neocon (AKA neoconservative)
Neofeudal Economy
Neofeudalism
Neoliberal Disease
Neoliberalism
Neo-Serfdom
Net wages
Newspeak
Ninety-Nine Percent (as in “We are the 99 Percent”) NINJA Loans
Nobel Economics Prize
O
Occupy Wall Street
Offshore Banking Center
Oligarchy
Optimum
“Other Peoples’ Money”
Over-Depreciation
Overhead
Ownership Society
P
Panic
Parallel Universe
Parasite
Partial Equilibrium Analysis
Patten, Simon R. (1852–1922)
Pension Fund Capitalism
Pentagon Capitalism
Physiocrats
Planned Economy
Poison Pill
Polarization
Politics
Pollution
Ponzi Scheme
Populism/Populist
Postindustrial Economy
Postmodern Economy
Price: See Just Price; Market Price; and Value Privatization
Privilege
Productive Loan
Productive vs. Unproductive Labor Profit
Progress
Progressive Era
Propensity to Save
Property
Prosperity
Protecting Savings
Protectionism
Public domain
Public Investment
Public-Private Partnership
Pyramid
Pyramiding
Q
Quandary
Quantitative Easing (QE)
Quantity Theory (Tautology) of Money (MV = PT) Quantum Finance
R
R2P (“Responsibility to Protect”) Race To The Bottom
Reaganomics
Real Economy
Real Estate
Real Wages
Real Wealth
Reform
Regressive Taxation
Regulation
Regulatory Capture
Rent
Rent, Economic: See Economic Rent and Rent Theory Rent of Location
Rent, Monopoly
Rent Seeking
Rent Theory
Rental Income (as distinguished from Economic Rent) Rentier
Rentier Income Ricardo, David (1772-1823)
Road to Serfdom
Rosetta Stone
Rule of 72
S
S-Curve
Saint-Simon, Claude Henri de Rouvroy, comte de (1760-1825) Sanctity of
Debt vs. Debt Cancellation Saving (distinguished from Savings) Savings
(distinguished from Saving) Say’s Law
Serfdom
Shareholder Value
Sharia Law
Single Tax
Sinking Fund
Sleeping and Eating
Sleeping Partner (AKA silent partner) Smith, Adam (1723-1790): See
Adam Smith Smith, E. Peshine (1814-1882)
Social Market
Socialism
Socialism for the Rich: See State Socialism Society
Socrates (470-399 BC)
Sovereign Debt
Sovereignty: See Government and Money Stabilization Program
Stages of Development
Stagflation
Stalinism
State Socialism (“Socialism for the Rich”) State Theory of Money
Sterile
Stockholm Syndrome
Structural Problem
Student Loans
Super Profits
Supply-Side Economics
Sustainability
Systems Analysis
T
Tableau Économique
Tax Shift
Taxation
Teleology
Thatcher, Margaret (1925-2013)
“The Market”
Thorstein Veblen Theorem
TINA (There Is No Alternative)
Too Big To Fail/Jail
Total Return
Totalitarian
Tragedy of the Commons
Transaction Cost
Transfer Payment
Transfer Price
Traumatized Worker Syndrome
Treasury
Trickle Down Economics
Truthiness
Two Economies
U
Underdevelopment
Unearned Income
Unexpected
Usury
Utility Theory
Utopia
Utopian Economics
V
Value
Value Added Tax (VAT)
Value-Free Economics
Veblen, Thorstein (1857-1929)
Vested Interests
Virtual Reality
Virtual Wealth
W
Wall Street
War
Washington Consensus
Watered Costs
Watered Stock
Wealth
Wealth Addiction
Wealth Creation
Who/Whom
Widows and Orphans
Windfall
World Bank
World System
X&Y
X and Y Axes
Z
Z
Zero-Sum Activity
• • •
TOPIC INDEX
A
a hundred years, 278, 324
a priori axioms, 120, 133
a priori , 120, 133, 222, 273, 288
A Wizard of Earthsea (1968), Ursula Leguin, 21
AAA credit labels, 169
ability to charge more for a product than is warranted, 160
ability to export, 116
ability to pay taxes, 104
abolish inheritance, 206
above the law, 67
absentee landlord, 32, 90, 173, 327
Absentee Ownership (1924), Thorstein Veblen, 242
absentee-owned real estate, 75
absolute poverty, 268
absolute-cost analysis, 259
absorb the losses, 187, 230
abstract assumptions, 169, 274
abstract logic, 120, 272
abstract reasoning, 286
Abu Ghraib, 173
abundance, 5, 31-32, 89, 124, 155, 176, 185
abuses, 212, 275
abusive behavior, 115, 212
academic credentials, 271
academic curriculum, 9, 18, 201, 227
academic economics, 242
academic journals, 268
academic models, 224
academic prizes, 96
academic status, 289
academic studies, 176
academic, 3, 9, 14, 18, 24, 52, 59, 78, 87, 96, 105, 120-121, 143, 176, 201,
215, 224-227, 229, 242, 254, 268, 271, 289, 301, 307-308, 321, 324, 333,
347, 349
acceptance, 23, 119, 270, 343
access charges, 93, 181
access fees, 15, 181, 197, 317
access to education, 184
access to transportation, 264
access to water, 114
accountable, 288
accounting fiction, 28, 253
accounting formats, 280, 317
Accounting , 11, 19-20, 27 , 35, 41, 58, 65, 67, 69, 75, 86, 94, 125, 148,
155, 163, 178, 188, 195, 201, 221, 225, 234, 252-254, 278, 280, 317, 349,
351, 353
accumulated takings, 121
ad infinitum upward trajectory, 134
Adam Smith (1723-1790) , 3, 9-10, 12-13, 15, 18, 21, 24, 27, 28 , 29, 31,
33, 35, 54, 58, 76, 80, 107, 111-112, 128-129, 139-140, 143, 149, 167, 177,
182-183, 197, 200, 211, 216, 224-225, 279-280, 285, 289, 291, 293, 301,
303, 308, 325, 333
administered prices, 147, 214
adulteration, 216
advertisers, 14, 64, 156
advertising slogan, 196
advocates, 3, 5, 24, 127, 142, 165, 187, 201, 210, 223-224, 241, 251, 271,
276, 330
Affluence , 28 , 80, 113, 299
Affluenza , 29 , 33, 42, 111, 115, 120, 122, 126, 198, 212, 245
affordability, 32
affordable or better goods and services, 208
Afghanistan, 338
after-tax dividends to shareholders, 316
after-tax income, 298, 311
age of deception and fraud, 284
aging bills, 206
Agio (a money-changing fee) , 30 , 127, 133, 162, 202, 208, 238
agio loophole, 30
agrarian debt, 61, 131, 142
agricultural chemistry, 78
agricultural tariffs, 58, 76, 202
agriculture, 31, 77-78, 105, 124, 139, 186, 198, 213, 216, 246, 275-276,
294
air rights, 139, 255
air-headed, 273
air, 20, 96, 139, 255, 273
airlines, 186, 328
airports, 186
Al Qaeda, 24, 338
Albany, 190
Alexander the Great, 66
algebraic formulae, 277-278
Alienation , 32 , 149, 212
all income brackets, 241
all markets, 86
all other things remaining equal, 219, 222, 274, 279
Allied monetary reform, 59, 69, 85, 108
Allied Powers, 246
Allison, William B., 96
altar of debt, 286
alternative banking, 171
alternative modes of economic or social organization, 223
alternative reality, 74
America’s Cold War ideology, 23
America’s great fortunes, 29
America’s Protectionist Takeoff 1815-1914: The Neglected American
School of Political Economy (new ed. 2010), Michael Hudson, 32, 36, 105,
187, 353
American banks, 339-340
American colonies, 28, 124
American control, 193
American creditors, 350
American economic takeoff, 30
American Economics Association, 55
American protectionists, 308
American School of Political Economy , 30 , 32, 126, 176, 186, 210, 353
amnesty, 40, 63, 203, 331
amortization, 51, 70-71, 83, 96, 101-102, 185, 187, 206, 253, 255, 258,
312, 317
analysis of the objective world, 305
analytic framework, 295
analytic tool, 12, 138, 241
analytical correctness, 288
anarchy of debt deflation, 59
ancient Egyptians, 187
ancient palaces, 64
ancient palaces, city walls, pyramids and public monuments, 64
ancient Rome and Greece, 89
Andelson, Robert, 234
anecdotal, 169
anger and rage, 268
Anglo-American banking, 19
Anglo-Irish bank, 162
Anglophilia, 31
annulling debts, 226
anomaly, 119, 279
anthropology, 330
anti-academic, 301
anti-classical reaction, 16, 19, 99, 239, 275
anti-classical revolution (curiously termed neoclassical by its participants),
306
anti-classical vocabulary, 15
anti-government interests, 293
anti-government libertarians, 292
anti-government resentment, 225
anti-government, 23, 46, 53, 125, 142, 147, 170, 201, 225-226, 292-293
anti-labor market, 211
anti-labor policies, 14, 237
anti-labor policy, 14, 237
anti-labor privatization policy, 137
anti-labor, 14, 73, 137, 202, 211, 237, 344
anti-monopoly legislation and enforcement, 197, 201, 225
anti-monopoly rules, 76, 226
anti-progressive, 241, 253
anti-reform ideology, 91
anti-royalist ideology, 280
anti-Semitic, 336
anti-social view, 223
antithesis, 85, 104, 126, 211, 219, 245
Apex Predator , 32
apologetics, 276
appearance of respectability, 271
Apple, 197
appraisers, 335-336
appreciation, 125
appropriate checks and balances, 147
apt metaphor, 323
Arbenz, Jacobo 23
arbitrage speculation, 189
arbitrage, 50, 55, 180, 189, 248
arbitrageurs, 51
archaeological record, 225
archaic economies, 65
area and zoning rights, 139
Argentina, 49, 116, 213, 332, 339-340, 352
Argentina’s default in 2002, 116
Aristophanes, 245
Aristotle, 74, 86, 172, 216, 326
arithmetic growth, 61
arms manufacture, 153
army, 65, 98, 111, 123, 131, 139-140, 182, 288, 329, 332, 341
artificial trade monopolies, 181
“As If” Argument , 33 , 106, 108, 239
as much as it takes, 189
as much as the market will bear, 197, 266
assassination and terror campaign, 229
assessed property value, 198
asset against spending, 259
asset ownership, 119
asset prices, 6, 33-34, 39, 44, 46, 71, 99-101, 156, 158-160, 170, 175, 178,
183, 191, 232, 241, 245, 252, 263, 265, 311-314, 316, 319-320, 352
asset side of the balance sheet, 242
Asset Stripping , 22, 34 , 49, 54, 73, 94, 101, 110, 121, 183, 217, 229, 246,
280, 331-332
Asset-Price Inflation , 3-4, 11-12, 14, 27, 33 , 40, 45, 50, 70, 73, 80-81, 92,
102, 106, 110, 115, 125, 138, 146, 156, 160, 174, 176, 183, 187-188, 222,
232, 235, 237, 243, 245-246, 252, 263, 268, 281, 287, 311-313, 319
assets and liabilities, 39
assumption that paying more for anything will increase its supply, 246
astrological diaries, 84
astrology, 272
at the majority’s expense, 281
Athenian judges, 231
ATM machines, 88, 125, 162, 168
Austerity , 3-6, 9-11, 19, 22, 27, 32, 34 , 39, 49, 59, 63, 70, 73, 85, 89, 92-
93, 96-97, 102, 106, 120-121, 123-126, 135, 141, 148, 152-153, 155, 157,
166, 170, 176, 178, 185, 190, 193, 201-202, 206, 209, 211, 213-214, 217,
219, 225-227, 230, 238, 244, 248, 254, 265, 269, 272, 274, 277, 279-280,
283, 285-287, 295-297, 309, 311, 319, 321, 331, 334, 339, 352
Austrian School of Economics , 35 , 59, 73, 87, 111, 120-121, 125, 149,
157, 166, 199, 214-215, 224, 226, 227, 278, 292, 308, 330, 329
Austrians, 35, 122, 224, 226, 278, 330
authoritarian, 80, 151, 239, 277
authority, 27, 67, 97, 163, 172, 202, 212, 263, 287, 301, 327, 333, 335, 346,
351
auto loans, 37, 102, 138, 315
autocracy, 22, 42
automatic bank transfer (ATM), 168
automatic recovery, 84
automatic stabilizers, 45, 266, 293-294
automobiles, 54, 182
average wage has not increased, 169
avoid paying income tax, 128
avoid placing the blame, 99
axioms, 120, 133, 272
B
Babylonia, 59, 65, 131-132, 139, 245
Babylonian accountants, 84
Babylonian contracts, 209
Babylonian palace, 84
Babylonian tradition, 89
back taxes, 85
Bacon, Francis, 238
bad bank debt, 102
Bad Debt , 37 , 61, 161, 344
bad financial instruments, 191
bad loan, 5, 37-38, 155, 161, 190, 219, 262
bad securities, 99
Bagehot rule, 262
Bagehot, Walter, 262
bailout (2008), 38
Bailout , 3, 5, 10, 14, 37 -38, 42, 53, 55, 88, 97, 102, 141, 161, 231, 233,
243, 261-262, 299, 340, 344
bailouts “or else”, 88
Bair, Sheila, 38, 102, 106
balance between land and buildings, 255
Balance of Payments , 38 , 116, 166, 273, 277, 349, 351
Balance Sheet Recession , 39 , 314
Balance Sheet , 27, 39 , 65, 69, 71, 91, 102, 105, 128, 148, 156, 158, 185,
196, 206, 232, 242, 245, 252, 254, 256, 286, 312, 314
balance-of-payments deficits, 41, 79, 109, 202, 244, 296
Balanced Budget , 9, 40 , 120, 156, 265
balanced economies, 237
balloon payments, 174
Baltic states, 22, 334, 336-338
Baltic Tigers, 336
bank account, 152
bank credit creation, 77, 189, 316
bank credit, 33, 39, 44-45, 70, 77, 97, 101, 106, 114, 156-157, 159, 173,
187, 189, 202, 225, 227, 258, 263, 281, 312, 316
bank debt, 69, 83, 102-103, 132, 181, 311, 346
bank deposit, 69
bank lending to infuse purchasing power, 318
bank loans for shares, 172
bank managers, 269
Bank of England (1694), 52, 60, 263
Bank of the United States (1791), 265
bank profits soared, 222, 263
bank regulation, 76
bankable asset, 196
banker’s monopoly privilege of money creation, 157
bankers threatened, 162
banking chaos, 213
bankrupt shell, 177
bankruptcy laws, 14, 226, 243, 312
Bankruptcy , 14, 37, 40 , 47, 59, 70, 99, 123, 126, 170, 175, 180, 217, 226,
243, 260, 280, 286, 312, 319, 332, 342
banks became the economy’s most profitable sector, 263
banks create money (credit), 159
banks create money (deposits), 10
banks in the Caribbean, 351
banks oppose analysis, 93
banks oppose property taxes, 141
banks speculated, 263
Banks, Bankers, Banking : See Finance Capitalism , 99; Financialization
, 101; and FIRE Sector , 103
Bankster , 40, 42, 169, 228
Banksterism , 40
bargaining, 269
barons (heirs of conquerors), 301
Barter , 35, 41 , 66, 151, 162-163, 207, 214, 226
basic industry, 237
basic living expenses, 78
basic principle, 214
basic utilities, 168
Baudelaire, 129
Becker, Jo 174
belief system, 232
Bernays, Edward, 22, 25
Berra, Yogi, 271
best of all possible worlds, 59, 119, 239
better schools, 198
better working conditions, 150
better world in practice, 239
better-paid labor, 277
Bezemer, Dirk 235
Bible, The 132, 159, 202, 245
biblical and Babylonian denunciations of merchants using false weights
and measures, 330
biblical End Time, 89
biblical sanctions, 238
bid up prices for stocks, 174
bid up prices, 187
bid up real estate prices, 101, 115, 262
Biden, Hunter, 341
Bierce, Ambrose, 43
Big Brother, 21, 79
Big Government , 41 -42, 63, 109, 142, 161, 200-201
bills of exchange, 30
biological parasitism, 323
Black Sea, 341
Black-Scholes mathematics, 191
Black, Bill, 30, 36, 129
blacks, 191, 344-345
Blackstone, 29, 191
Blair, Tony (1953-) , 43 , 47, 211, 223
blame labor, 93
Blame the Victim , 35, 43 , 117, 119, 121, 145, 243, 279
Blanchard, Olivier, 94
Blankfein, Lloyd, 182, 275, 324
bleed companies, 50
bleed the patient, 213
bloated budgets, 177
block depositors, 162
block nominees, 196
blocked currencies, 186
blocked recovery from euro-austerity, 230
Boesky, Ivan, 116, 132
Bogle, John C., 160, 163
Bolshevik coup in 1917, 147
Bolshevik party, 90
bombs, 338
bonanza of fees, 160
Bond , 3, 15, 21, 33, 38-40, 43 , 50-51, 63, 73, 87-88, 97, 99-101, 106, 109-
110, 116, 123, 125, 128, 131-133, 156, 158-160, 174, 177-178, 183, 189-
191, 194, 196-199, 201, 207, 209, 213, 228, 230, 232-233, 241-242, 244-
245, 257, 263, 273, 281-282, 285, 299, 301, 311-313, 316-319, 327, 339,
342, 350, 352
bondholders, 5, 10, 16, 32, 38, 40, 44, 57, 59-60, 63, 70, 72, 77, 80, 85, 92,
96, 102, 121-123, 126, 132, 148, 152, 156, 159, 161, 167, 175-176, 178,
180, 185, 190-191, 207, 211-213, 215, 230-231, 233, 243, 255, 260, 262,
265, 288, 296-297, 316, 318, 320, 328, 334, 340, 342, 344, 346
bondservants, 69, 131, 142, 331
bonuses, 101, 121-122, 148, 182, 259, 316-317, 343
book value, 208
bookkeeping, 39
boomer, 115
born from the loan, 216
borrow the interest falling due, 180
borrow to get out of debt, 75, 217, 263
borrowing costs, 189, 230, 263
Bostonians, 30
bought on credit, 100, 154, 195
Bourgeoisie , 41, 43 , 149, 153, 209, 211, 293
Brady bonds, 350
brainwash students, 242
Brazil, 53, 352
break-even cost of doing business, 100
break-even cost of living and doing business, 39
break-even cost, 39, 100, 320, 346
breakdown, 41, 102, 141, 154, 207
breaking up companies, 132
Brennan, Geoffrey,204
bribes, 165
BRICS, 53, 79, 124
bringing prices in line with real cost-value, 202
Britain’s Corn Laws, 58, 186, 219
Britain’s House of Lords, 15, 41
Britain’s kings, 286
Britain’s Liberal Party, 142
Britain’s military adventures, 80
Britain’s Parliament, 209
British free-trade economics, 31
British free-trade theory, 176, 210
British industrial imperialism, 211
British landlords, 91, 231
British Telephone, 137, 223
British union for Uber drivers, GMB, 152
brokerage house, 87, 99
Bronze Age origin, 56
Bronze Age, 32, 35, 41, 56, 59, 144, 155, 178, 214, 225, 324, 331-332, 349
brownfields, 198
brutal form of imperialism, 123
Bubble Economy , 12, 22, 44 , 47, 50, 78, 97, 110-111, 162, 179, 197, 227,
316, 319-320
Bubble Illusion , 45 , 159
bubble model, 4, 11, 51, 77-78, 115, 168, 195, 227, 233, 311, 313, 315, 317,
319, 321
Bubble , 3-4, 8-9, 11-12, 22, 34, 37, 39, 41, 44 , 47, 50-52, 65, 69, 72, 77-
81, 87, 97-100, 110-111, 115, 129, 134, 143, 159-160, 162, 168, 174, 178-
180, 183, 185, 187, 189, 191, 194-195, 197, 209, 227, 233, 235, 238, 245,
284, 311-313, 315-317, 319-321, 335, 350, 353
bubbling, 227, 262
Buchanan, James M., 170, 200, 204
budget deficits, 10, 40, 42-43, 52, 80, 91, 97-98, 103-104, 109, 124, 126,
142, 152, 156, 158, 222, 226, 230, 233, 259, 265, 312, 321
budget surplus, 10, 40, 85, 103, 168, 265
budget-deficit scaremongers, 116
budget-deficit stimulus, 269
budgetary shortfalls, 99
Buffett, Warren, 57
bullion content, 157
bureaucracies, 155, 167, 202, 215
burglar alarms, 253
burglars, 253
Burisma, 341
Burns, Arthur, 310
Bush, George W., 13, 44, 174, 209, 343
business centers, 230
Business Cycle , 39, 45 -47, 61, 71, 84-85, 124, 133, 175, 207, 266, 293
business expenses, 152
business operating costs, 78
business plan, 44, 243, 304, 311, 320
business planning, 278
business profits, 58, 99-100, 317
business schools, 31, 288
business upswing, 45, 54, 84, 133, 258
butlers, 182, 216
buy control of government, 242
buy elections, 261
buy food and raw materials in the cheapest markets, 202
buy in the cheapest market, 91
buy out the land, 210
buy out the landlords, 301
buybacks, 34, 44, 50, 101, 122, 168, 190, 208, 228, 243, 316
buyer beware, 29
buying a home on credit, 122
buying luxury products, 145
buying on credit, 18, 146
buyouts of foreign assets, 79
C
cable service, 186
cable TV, 168
Cacus, 21
Cadelli, Manuela, 94, 163
calculation, 114, 165, 252, 292
calendar, 178
California, 152-153, 222
campaign contributions, 50, 177
campaign financing, 73
campaign funds, 179
campaign slogan, 145
canals, 186
Canary Wharf, 113
Capital Flight , 34, 49 , 59, 63, 91, 110, 120, 226, 244, 283
Capital Formation , 50 , 100, 120, 128, 135, 186, 245, 248-249, 257-259,
265, 281, 284, 320
Capital Gain , 11, 33-34, 43-44, 50 -51, 70, 78, 81, 83, 92, 98, 100, 128,
138, 179, 183, 187, 198, 201, 215, 225, 227-228, 232, 237, 246, 252-253,
256-257, 259-260, 280, 282, 292, 313, 319, 335, 354
capital gains are not traced, 280
capital good, 8, 96-97, 194
capital improvements, 75, 77, 112, 145, 173, 254
capital intensive, 96
capital investment, 33, 75, 84, 98, 101, 105, 112, 133, 150, 168, 172, 178,
181, 184, 194, 199, 206, 218-219, 243, 253-254, 263, 268, 284, 294, 312,
318
capital outlay, 244
capital ratios, 190
capital stock, 75
capital transfers, 277, 307
capital-intensive, 35
Capital , 3, 8, 11, 32-35, 38, 43-44, 49 , 55-56, 59-60, 63, 65, 69-70, 73, 75,
77-78, 81, 83-84, 91-93, 95-101, 103-105, 107, 110, 112, 115, 119-121,
128-129, 133-136, 138, 145, 148-151, 161, 168-169, 172-173, 176, 178-
181, 183-184, 186-187, 190, 194, 198, 201, 206, 211, 215, 218, 221, 225-
228, 232, 235, 237, 241, 243-246, 248-249, 252-254, 256-260, 263, 265,
268, 273-274, 277, 279-285, 292, 294, 300, 307, 311-313, 315, 318-320,
323, 325-326, 328, 335, 339, 345, 347, 349, 353-354
Capitalism , 3, 7, 10, 15-17, 19, 32, 43-44, 50 , 53, 55, 57, 59, 61, 63, 65,
67, 76, 89-90, 92-93, 97, 99-100, 104-105, 128-129, 136-139, 141-143,
145, 149-150, 153, 160, 163, 167-168, 174-177, 182, 187, 202, 210-211,
213, 215, 223, 234, 243-244, 258, 260, 294, 303, 311, 318-319, 321, 325,
333, 339, 342, 347, 349, 352-353
Capitalism, Casino : See Casino Capitalism , 51
Capitalism, Crony : See Public-Private Partnership , 187
Capitalism, Finance : See Finance Capitalism , 99
Capitalism, Money Manager : See Money Manager Capitalism , 160
Capitalism, Pension Fund : See Pension Fund Capitalism , 176
Capitalism, Pentagon Capitalism : See Pentagon Capitalism , 177
capitalists in miniature, 93, 137, 152, 223, 260
capitalists, 33, 35, 56, 58, 93, 95, 128, 137, 149, 152, 219, 223, 226, 260,
303
capitalize (financialize), 143
capture monetary policy, 133
carbon dioxide, 46
Carey, Henry, 30, 77, 186, 210
Caribbean, 172, 351
Carlyle, Thomas, 77
carried interest, 29
Carroll, Lewis, 14
carrying debts, 70
carve up the economy, 335
Cash Flow , 28, 51 , 83, 97, 100, 122, 132, 168, 178, 183, 208, 222, 253,
316-317
cash reserves, 178
cash-rich position and low debt, 132
cashed out, 147
casino always wins, 343
Casino Capitalism , 3, 49, 51 , 51, 53, 55, 57, 59, 61, 63, 65, 67, 76, 160
casino gambles, 340
castle-like estates, 269
catch up, 111, 238
Catholic Church, 17
cattlemen, 244
causal dynamics, 97
Causality , 51 -52
caveat emptor , 29
censorial dismissal, 298
censorship of alternatives, 226
Census Bureau reports, 281
Central Bank Reserves , 53 , 79, 159
Central Bank , 14, 37, 52 , 55, 63, 75, 79, 92, 97, 102, 109, 111, 121, 124-
126, 142, 159, 161, 173, 189, 213, 215, 229-230, 233, 257, 263, 268-269,
282, 285, 288, 316, 318, 331-332, 339-340
centralized bureaucracies, 202
centuries-long conflict, 291
Chan, Sewell, 134
changes in the money supply, 106
charitable not-for-profit, 172
charities for the homeless in Manhattan, 190
charities, 190
Chartalism , 53 , 159, 215
charter schools, 345
Chase Manhattan Bank, 349
cheating and looting, 229
checks and balances, 120, 147, 155, 180, 196, 224, 228, 304, 335
chemical, 32
chemists, 77
Cheney, Dick 177
Chicago Boys , 53 , 137-138, 177, 226, 229, 297
Chicago School , 11, 53 , 59, 67, 73, 97, 105, 109, 111, 113, 120-121, 129,
133, 143, 148, 158, 167, 170, 201, 212, 275-276, 296-297, 300, 325-326,
332-333, 342
Chicago Tribune , 342
chief executives, 121
chieftains’ households, 155
Chile, 17, 53, 116, 137-138, 153, 177, 223, 226, 229, 260, 268, 277, 280,
325-326
Chile’s 1973 coup and the assassination of Allende, 325
Chilean companies, 137
China, 53, 124, 224, 227, 318, 338, 349
Chinese coolie trade, 210
Choice , 18, 32, 43, 54 , 63-64, 75, 122, 125, 149, 161, 173, 199-200, 224,
239, 295, 306
chokepoints, 139
Christian charity, 270
Christian religion, 270
Christian repudiation of usury, 270
Christian socialism, 15, 294
Christopher Columbus’s voyages of conquest, 208
chronic depression, 170, 258, 270
chronic economic error, 248
chronic structural problem, 217
church communities, 41
church officials, 182
church theologians, 133
churning, 99
cigarette companies, 23
Circular Flow , 54 , 64, 79, 150, 177, 194, 207, 232, 296
circular reasoning, 146, 254, 271
circular time, 59, 184
Citibank, 162
citizen army, 111, 131
Citizens United v. the Federal Election Commission, 64
City of London, 16, 109, 142, 197, 331
city walls, 64
civic improvements, 114, 140
civic pride, 114
civil fines, 67, 121, 262
civil war, 30-31, 56, 109, 156-157, 186, 265, 330
civilization, 22, 55-56, 64, 67, 88, 120, 224, 256, 296, 329-330, 352
clan groupings, 139
clans, 139
Clark, John Bates (1847-1938) , 55 , 59, 74, 87, 93, 149, 166, 176, 184,
198, 201, 217, 239, 254, 295, 324
Clash of Civilizations , 55 , 88, 120
clash within, 56
class biases, 276
Class Consciousness , 43, 57 , 150
Class Struggle , 58 , 121, 149, 245
Class , 5-6, 9-10, 14-15, 20, 22-23, 29, 36, 43, 56 , 64, 74, 89-90, 92-93,
102, 104, 120-123, 126, 133, 138-139, 142, 145-146, 149-150, 152-154,
165, 172, 176-177, 182-184, 186, 196-198, 209, 211, 223-226, 231-232,
242, 245, 249, 251, 257, 273, 276, 279, 287, 292, 297, 299-301, 317, 320-
321, 327, 333, 339, 346
classical antiquity, 32
classical focus on wealth, 279
classical ideal, 6, 304
classical liberalism, 14, 325
classical liberals, 89, 167
classical moral philosophy, 295
Classical Political Economy , 18, 22, 58 , 86-87, 90, 127, 146, 167, 176,
183-185, 196, 211, 221, 277-280, 300, 303, 306, 308, 333
classical tax philosophy, 173
classical vocabulary, 15, 304
clawbacks, 110
Clay, Henry, 30, 186, 210
Clean Slate (AKA Debt Forgiveness) , 37, 39-40, 47, 56, 59 , 61, 63, 69,
85, 116, 124, 131, 142, 180, 184, 191, 203, 206, 214, 226, 238, 258, 270,
319
Clean Slate Proclamations, 142
clergy, 31
Cleveland Mayor, Tom Johnson, 296
Client Academics , 3, 59 , 96, 120, 143, 225, 324
Client Oligarchy , 43, 49, 53, 57, 59 , 63, 74, 80, 115, 121, 123-124, 153,
166, 172, 202
Clinton Administration, 9, 156
Clinton, Bill, 265
Clinton, Hillary, 153
close libraries, 190
coachmen, 182, 216
coal, 210
Coase, Ronald, 170
coercion and dependency, 93
coercion, 93, 239
Cognitive Dissonance , 59 , 232
Cohen, Tamara, 112
coinage, 157, 159, 207, 215-216
Colbert, Stephen, 151, 232
Cold War neoliberals, 110
Cold War, 23-24, 56, 110, 244, 338
Cold War, The, 56
collapse of Russian manufacturing after 1991, 183
collapse of The Old Order, 89
collapse of the Roman Empire, 73
collapse of the Soviet Union, 88
collateral damage, 120, 169, 340
collateral for potential liquidation purposes, 207
collateral-backed bank loans, 190
collateral-based banking, 184
collateralized debt obligations, 340, 343
collusion, 114, 227
colonial dependencies, 60
colonial rivalries, 80
colonialism implies war, 123
Colonialism , 15, 28, 60 , 86, 121, 123-124, 318
colonization privileges, 161
colony, 28, 123-124, 211, 237, 246, 332
Colton, Calvin, 30
Columbia Encyclopedia, 71
Columbia University, 177, 272, 327
Columbus, Christopher, 208
commanding heights, 75
commercial “silver” debts, 131
commercial banks, 10, 52, 66, 97, 157, 215, 217, 230, 263, 265, 320, 330
commercial lending, 238
commercial property rent, 197
commercially productive loans, 127
commissions and fees, 160
commodity prices, 33, 97, 106, 170, 190-191, 205, 214, 241
commodity sales, 229, 241
commodity, 27, 33, 41, 56, 64, 97, 106, 145, 147, 156-159, 170, 182, 190-
191, 195, 205, 214-216, 225-226, 229, 238, 241, 294
common denominators, 294
Commons , 34, 60 , 63, 65, 140, 165, 167, 181, 186, 229, 234, 255
commonweal, 4, 11-12, 22, 128, 244, 305
communal grazing land and forests, 181
communalist context, 139
communication, 20, 34, 58, 76-77, 112, 114, 148, 161, 181, 186-187, 255-
256, 259, 285, 288, 316, 321
communism, 22-23, 55, 333
communist ideal of abolishing the state, 149
communist International, 151
Communist Manifesto (1848), Karl Marx and Frederich Engels, 149, 279
communist party leadership, 136
communist youth groups, cooperatives and gangs, 136
community interest, 114
community organizer, 344
compact store of value, 215
company of men, 60
company-owned stores, 71
Company , 14, 22-23, 34, 40, 44, 50-51, 57, 60 , 64, 67, 70-71, 99, 101,
110, 121-123, 132, 137, 143, 148, 152, 159-161, 167, 171-172, 177-178,
189-190, 193, 197, 205, 207-208, 223, 228-231, 244, 260, 269, 294, 316,
328, 331-332, 339, 341, 343, 346, 351
comparative advantage models, 279
comparative-cost ratios, 259
compensation fines, 110
compensation for risk, 127
competing ends, 92
competition, 160, 224-225, 241, 294, 327
competitive bidding, 177
competitive costs, 241
competitive edge, 303
competitiveness, 34, 72, 79
complex dynamics, 247
complex results, 78
complexity of formulas, 191
compliance costs, 266
Compound Interest , 20, 38-39, 60-63 , 71-72, 79, 85, 90-91, 93, 102, 115,
124, 127, 148, 150, 157, 180, 185, 187, 203, 205, 209, 217, 238, 242, 258,
266, 286-287, 318-319, 350
compulsive acquisitiveness, 111
compulsory health insurance, 314
compulsory saving, 138, 160, 191
concealing gains from public view, 282
concentrate income growth, 178
conceptual organization, 165
Conditionalities , 34, 39, 43, 59, 63 , 70, 75, 92, 123, 141, 161, 185, 201,
213, 237, 244, 258, 265
confidence in contracts, 231
confidence man, 180
confidence, 43, 180, 215, 231
conflating economic rent with profit, 184
conflating rent seeking with subsidies, 199
conflict of interest, 98
conflict over the scope and basic assumptions of economics, 291
Confucius, 13
confusion of correlation with causation, 246
confusion of output with overhead, 165
congressional backers, 244
conquests, 31, 57, 327
consensus, 14, 34, 39, 49, 53, 57, 63, 74-75, 80, 90, 92, 96, 121, 123, 126,
132-133, 136, 153, 166, 172, 181, 193, 196, 202, 213, 237, 244, 246, 274,
277, 283, 328, 332
consent, 22, 25
consequences of change, 176
Conservatives , 52, 63 , 291-293
conserving natural resources, 229
conspicuous consumption, 146, 242
conspire against the public good, 129
constant upward trajectory, 223
construction costs, 281
construction price index, 254
consume more later, 121
consume now, 121, 125, 133
Consumer Demand , 64
consumer financial protection bureau, 268
consumer goods prices, 313
consumer is king, 64, 238
consumer or wholesale prices, 125
Consumer Price Index (CPI) , 64 , 195, 313
consumer protection, 42, 211, 226
consumer safety protection, 120
consumer spending, 58, 64, 79, 84, 101, 121, 232, 263, 314-315
consumer utility, 241, 301
Consumer , 8, 17, 22-23, 15, 28, 33, 39, 41-42, 54, 58, 63 , 70, 73, 78, 79,
84, 95, 98, 101, 102, 103, 106, 110, 111, 120-121, 125, 133, 137-139, 145,
152, 158, 159, 161, 167, 177, 185, 186, 190, 191, 195, 196, 211, 213, 218,
221-223, 226, 232, 233, 238-239, 241, 263, 264, 268, 278, 283, 286-288,
292, 295, 301, 312, 313-315, 317, 319-321, 328, 345-346, 352
consumption expenses, 182
consumption, 8, 18, 38, 45-46, 54-55, 57, 63-64, 70, 72, 79, 84, 102-103,
111, 121-122, 125, 145-146, 153, 174-175, 182, 185, 194-195, 198, 207,
222, 232, 242, 253-254, 263, 268, 281, 296, 299, 308, 317, 319, 346
content, 3, 11, 36, 55, 127, 151, 157, 168, 203, 321
control of bank credit, 225
control of politicians, 88
cooked, 252
Copernican revolution, 307
copper, 147, 158, 225
copyright owners, 255
Corbyn, Jeremy, 43
corporate accountants, 28
corporate breakups, 143
corporate buyouts, 99
corporate cash flow, 97, 122, 168, 208, 222, 316
corporate debt, 44
corporate grupo , 177
corporate lobbyists, 24, 316
corporate managers, 101, 316
corporate ploy, 260
corporate raiders, 34, 100, 132, 143, 219, 332
corporate scandals, 116
corporate sector, 50, 178
corporate shells, 64, 342
corporate stocks, 101
corporate takeover loans, 33, 97, 312, 318
corporate tax accountants, 230
corporately owned land, 255, 281
Corporation (Limited Liability Company, LLC) , 40, 42, 60, 64 , 67, 80,
160, 162, 218, 222, 243, 260, 285, 316, 343, 345
corporations are people, 64, 67
corporatism, 215
correlation analysis (“projecting the past”), 191
corrode economies, 249
corrupt insider dealing, 66
corrupt management, 210
corruption, 42, 93, 174, 184
Corvée Labor , 64-65, 139-140, 195, 222
cosmopolitan financial institutions, 229
cosmopolitan, 57, 123, 229
cost of debt-leveraging, 189
cost of feeding slaves, 31
cost of labor effort, 138
cost of living and doing business, 39, 72, 80, 96, 148, 176, 181, 200, 202,
224, 256, 293, 316, 320, 328, 346
cost of living, 39, 72, 77-80, 96, 148, 176, 181, 195, 200, 202, 224, 256,
293, 303, 316, 320, 328, 346
cost of polluting, 88
cost of production (value), 98
cost of production, 9, 15, 96, 98, 140, 160-161, 208, 244
cost of war, 80
cost plus, 153, 177, 244
cost structure, 77, 100, 186, 256, 279, 295, 297, 321
cost-cutting, 97, 153, 319
cost-value, 15, 127, 148, 197, 202, 208, 292, 294, 301, 303, 317
Cost : See Value , 241 contrasted with Economic Rent , 85; And 5-6, 9, 15,
20, 27-28, 31, 34-35, 39, 44, 52, 60, 63-65, 70, 72, 75-80, 85-86, 88, 90, 93,
95-100, 103, 105, 108, 113-114, 123-125, 127, 133-134, 138, 140, 143-144,
148-149, 153, 156, 159-161, 168, 170, 174, 176-177, 181, 183-184, 186-
187, 189, 192, 195, 197, 200, 202, 204, 208, 210, 216-217, 223-225, 229-
230, 241-242, 244, 246, 253, 255-256, 259, 263-264, 266, 278-281, 284,
286, 292-295, 297, 301, 303, 311, 314, 316-321, 326, 328, 333-334, 337,
346
cotton, 210
Couch, Ethan 29
Council of Economic Advisers, 204
counter-Enlightenment, 16, 19
counter-intuitive, 264
counter-measures, 175, 180
counter-revolution, 184
counterfeiting, 159
Counterpunch , 4, 323, 347
countries at war, 340
country towns, 114
coupon clippers, 198, 317, 327
cover story, 5, 8, 92, 110, 125, 141, 157, 196, 218, 251, 262, 264
CPI (Consumer Price Index), 64, 195, 313
cranks, 10
Crash, 1929, 98
Crash, 2008, 7, 87, 102, 158, 162, 173, 185, 189, 213, 312, 318
creating shareholder value, 316
Creative Destruction , 65 , 78, 97, 297
credibility, 43
credit and debt accumulation, 300
credit card debt, 37, 153, 167-168, 217, 314-315, 346
credit default swaps, 76, 340, 343
credit instrument, 53
credit lines, 92, 148
Crédit Mobilier, 205
credit services, 246
credit stage, 66
Credit , 9-10, 15-16, 18, 20, 33-34, 37-40, 44-45, 47, 51-53, 55-57, 65 , 69-
70, 72, 74-78, 83, 92-93, 97-98, 100-103, 106, 109-111, 114-115, 122, 126-
128, 133, 136, 138, 143, 146-148, 152-157, 159, 163, 167-170, 173-174,
178-181, 185-187, 189-191, 194-197, 201, 206, 210, 213-215, 217, 219,
224-227, 229-230, 232, 243, 246, 248, 255, 257-259, 262-263, 265, 267-
269, 275, 281, 287, 293-295, 297, 300, 302, 311-316, 318-321, 330, 333,
335, 340-341, 343, 346, 349
creditor claims, 18, 166, 190, 269
creditor power, 123, 228, 231
creditor-nation courts, 213
creditor-oriented laws, 56, 231
creditors are assumed to invest their earnings in expanding output, 281
crime and fraud, 194
crime prevention, 280
Crime , 29, 52, 66 , 74, 76, 165, 194, 228, 239, 252-253, 280, 299, 312,
329, 351
criminal takings, 280
Criminal , 66 , 167, 172, 228, 280, 351
criminals, 167, 172, 351
crisis, 5, 7, 11-12, 46-47, 49, 52, 61, 63, 69, 72, 75-76, 84-85, 87-88, 92-93,
97, 101, 110, 121, 149-150, 154, 159, 163, 202, 205, 213, 227, 231, 235,
243, 258, 262, 265, 284, 292, 297, 311-312, 321, 337, 339-340, 344, 350,
353
criterion for regulation, 295
critique of land rent, 182
crocodile tears, 245
Crony Capitalism : See Privatization , 181; Public-Private Partnership ,
187; and 67, 187
crop surplus, 139, 161, 210
crop yields, 78
crops, 76, 84, 102, 140, 182, 201, 210, 216, 332
cross-option bets, 76
crown jewels, 34
crucifixion on the cross of gold, 109
Crusades, 30, 127
Cuba, 268
cultivation of poorer soils, 246
cultivators, 65, 85, 177, 207
cultural hegemony, 119
currency destabilization, 34
currency devaluation, 63
currency support, 63, 246
current income, 49-50, 83, 100, 122, 228, 256, 319-320
current rental value, 254
current reported income, 208
curriculum, 9, 18-19, 56, 87, 175, 201, 227, 267, 327
curse of oil, 80
curse of rich natural resources, 79
cut and run, 123
cut back pensions, 229
cut-off point for Social Security tax, 261
cutbacks in long-term investment, 285
cutbacks in public spending, 125, 265
cutting costs, 27, 78, 177, 317
cutting personal taxes, 346
cutting public spending, 10, 336
cutting real estate taxes, 264
cutting taxes, 194, 218, 298, 315
cynic, 87
D
dairy farmers in Iowa, 190
Dark Age, 41, 56, 66, 73, 89, 270, 299
Darwin, 15
DDT, 71
de Balzac, Honoré, 66
de facto employees, 153
de facto government, 255
de-industrialize, 167
deadbeats, 269
deadweight, 54, 125, 133, 170, 224, 256, 293, 330
death is a state of equilibrium, 91
death panels, 151
debilitating companies, 178
debt amnesty, 63
debt arrears, 85, 176
debt as an instrument of exploitation, 352
debt bondage, 63, 131, 206-207, 216, 323-324, 332, 347
debt buildup, 41, 184
Debt Cancellation/Clean Slate , 35, 59, 69 , 85, 108, 132, 184, 203, 206-
207, 214, 226, 353-354
debt counterpart, 232
Debt Crisis , 61, 63, 72 , 75, 284, 340
Debt Deflation , 3, 7, 10-11, 20, 22, 34, 39, 45, 47, 53, 59, 61, 63-64, 70 ,
77, 79-81, 84-85, 93, 97, 99-100, 102-104, 106, 111, 115, 120, 123, 126,
136, 143, 156-158, 160, 175, 178, 180, 185, 190, 196, 202, 206-207, 209,
213-214, 217-219, 222, 229, 232, 235, 238, 243, 249, 258, 261, 263, 268-
269, 283, 288, 295, 297, 299-300, 311-312, 319, 353
Debt Dependency , 16, 35, 70 , 237, 274-275, 287, 294, 331
Debt Drag , 70 , 80
debt financing, 18, 80, 268, 300
debt forgiveness ( See Clean Slate), 59
debt is used as a weapon, 331
debt ladder, 153
Debt Leveraging , 7, 34, 43, 50, 54, 70 , 97, 99-101, 154, 159-160, 178,
182-183, 187, 248, 281, 320
debt leveraging, 7, 34, 43, 50, 54, 70, 97, 99-101, 154, 159, 178, 182-183,
187, 248, 281, 320
debt overhang, 8, 102
Debt Overhead , 5, 45-46, 54, 61, 70 , 77, 88, 100-101, 108, 124-125, 135,
143, 159, 183, 195, 214, 218, 226, 243, 258, 273, 282, 285, 303, 312, 318
Debt Peonage , 3, 18, 20, 64, 69, 71 , 74, 79, 89, 93, 100, 102, 113, 117,
121, 142, 153, 166, 168, 173-174, 197, 202, 258, 269-270, 276, 302, 304
Debt Pollution , 46, 71 , 90, 179-180
debt pyramid, 187
debt relationships, 119
debt relief, 104, 106, 191
debt salesmanship, 71
debt slavery, 23
debt treadmill, 116
debt write-downs, 116, 225
debt-financed degrees, 302
debt-leveraging ratio, 70
debt-leveraging, 45, 70, 83, 189, 312
debt-ridden depressions, 45
debt-servicing problem, 332
debt-strapped economies, 11, 270
Debt , 3-8, 10-12, 14, 16, 18, 20-23, 30, 32-35, 37-41, 43-47, 49-50, 52-55,
57, 59-66, 69 , 77-81, 83-85, 88-90, 92-94, 97-104, 106, 108-111, 113, 115-
117, 119-127, 129, 131-136, 138-143, 146, 148, 150, 153-161, 166-169,
173-176, 178-191, 194-197, 201-203, 205-207, 209, 212-219, 222, 225-
226, 229, 232-235, 237-238, 242-243, 246-249, 258, 261-263, 266-270,
273-277, 279-288, 294-305, 311-316, 318-321, 323-324, 330-335, 337,
339-340, 343, 345-347, 349-350, 352-354
Debt: The First 5000 Years (2011), David Graeber, 330
debt/equity ratios, 39, 101, 312
debtor countries, 34, 38, 63, 92, 123, 135, 213, 244, 280, 307, 340, 352
debts accrued, 216
debts don’t matter, 202
Debts that can’t be paid, won’t be” , 61, 72
deception, 1, 3, 10, 13, 18, 24-25, 103, 111, 120, 129, 143, 271, 284
decline in purchasing power, 195
Decline of the West , 73
Decontextualization , 73 , 93
deducted from paychecks, 168
deductive method, 242
deep depression, 38
deepening government dependency, 296
default insurance contracts, 340
default, 9, 37, 39, 72, 74, 76, 116, 126, 180, 185, 200, 285, 319, 340-341,
343
defaulting, 52, 70, 101, 181, 230, 258
defense against financial raiders, 178
defensive ploy, 178
defer current income, 122
deficits are self-financing, 80
defined contribution plans, 123
deflate consumer spending, 263
deflation and unemployment to keep wages down, 160
Deflation , 3, 7, 10-12, 20, 22, 31, 34, 39, 45, 47, 53, 59, 61, 63-64, 73 , 77,
79-81, 84-85, 93, 97, 99-100, 102-104, 106, 109, 111, 115, 120, 123, 126,
136, 143, 156-158, 160, 175, 178, 180, 185, 188, 190, 196, 201-202, 206-
207, 209, 213-214, 217-219, 222, 229, 232, 234-235, 238, 243-244, 249,
258, 261, 263, 268-269, 283, 288, 295, 297, 299-300, 311-313, 319, 340,
353
deflationary monetary policy, 157
“Delay, delay, delay!” 63
delaying payment, 206
deliver their constituencies, 73, 179
Demagogy , 73 , 231, 251, 262
demand for British industry, 145
demand for dollars by criminals, 351
demand, 9, 28, 34, 37, 64, 79, 86, 88, 100, 105, 111, 119, 121, 145-146,
148, 152, 154, 176, 196, 207, 213, 217, 231, 238, 247, 256-257, 270, 278,
284, 300, 321, 332, 340, 351
Demint, Jim, 63
demobilizing governments, 176
Democracy Now , 349
Democracy , 19, 21, 24, 36, 53, 56, 74 , 88-89, 94, 100, 116, 142, 157, 163,
172, 201, 213, 251, 269-270, 296, 302, 326, 331, 339, 349
democratic choice, 125
democratic government, 24, 42, 88, 197, 202, 228, 269, 319, 326, 329
democratic parliamentary reform, 293, 319
democratic party, 31, 150, 345
democratic political process, 285
democratic socialism, 63
democratic voters, 75
democratically empowered governments, 16
Democratization of Credit , 74
demographic collapse, 65, 226, 268
demonize, 169, 224
demoralization, 217
Deng, 345
Denial , 59, 74-75, 93, 121, 176, 268, 320
denominate debts, 158, 216
deny global warming, 93
Department of Divination, 84
Department of Extipacy, 84
dependency on nature, 80
Dependency , 16, 24, 31, 33, 35, 52-53, 63, 70, 74 , 80, 93, 121, 123, 169,
199, 213, 237, 239, 246, 274-275, 284, 287, 294, 296, 331
depopulation, 22, 207, 244
deportations and exile, 336
depreciation again and again for tax purposes, 253
depreciation allowance loophole, 75
depreciation and amortization, 51, 83, 96, 253, 255, 317
depreciation rate, 75
Depreciation , 28, 50-51, 75 , 81, 83, 96-97, 116, 165, 173, 253, 255, 277,
314, 317
depression, 20-22, 38, 45-46, 80, 135, 162, 170, 198, 207, 258, 265, 270,
297, 300, 334, 344
deregulated “free” markets, 299
deregulated credit creation, 229
Deregulation , 14, 18, 28, 54, 76 , 79, 142, 184, 229, 272, 280, 291
deregulatory 2008 crash, 158
deregulatory policy, 103
derivative straddle, 99
Derivatives , 76 , 87, 170, 343
desert island, 275, 293, 301
desert-island methodology, 11
desirability of taxing the flow of unearned income, 201
destroy (by selling), 143
destructive effect, 132, 179
deter investment, 213
deter public regulation, 105
develop in a healthy way, 237
development of an ethical, regulatory and legal environment, 160
dialectics, 279
Dialogue (c. 428 BC), Plato, 29
dichotomy, 280
dictatorial powers, 202
dictatorships, 168, 283
Diderot, Denis, 16, 89
Die Isolierte Stadt (1826) by Heinrich von Thünen, 77
die-offs, 71
difference between theory and practice, 271
differential land rent, 77
Dijsselbloem, Jeroen, 268
dilemma, 282-283
diminishing marginal utility, 111
diminishing returns to soil, 77
Diminishing Returns , 31, 76 , 146, 201, 219
Dimon, Jamie,104
direct costs of building railroads, 278
direct public investment, 92
disabling power of debt, 352
discovery, 256, 279, 309
Discretionary Income , 77
disenfranchisement, 111, 212
disinterested, 133, 291
Dismal Science , 31, 77 , 121, 124
dismantle industry, 335
dismantling of public sectors, 276
Disposable Personal Income (DPI) , 54, 64, 78 , 84, 129, 153, 168, 222,
314-315
disproportionate share of assets, 174
disruptive dynamics, 141
dissolution of the Soviet Union in 1991, 90
distorts language, 155
distract attention, 20, 33, 55, 73, 92, 93, 175, 242, 264, 271-272, 275, 278,
282, 288, 296, 300
distress, 94, 261, 286, 288
distribution does not matter, 298
distribution matters, 291
Distribution of Average Income Growth During Expansions (chart), 179
distribution of wealth and income, savings and debt, 90
distribution of wealth, 55, 90, 181, 213, 239, 268, 291, 297
distribution problem, 299
disutility, 125, 238-239
divert earnings to pay dividends, 101
diverting profits, 178
diverting savings, 229
dividend payouts, 34, 101, 122, 243, 316-317, 343
dividends, 38, 51, 70, 100-101, 103, 125, 128, 132, 168, 186, 197, 208, 228,
283, 316, 346
divinity or school metaphysics, 286
divorce settlements, 245
Djilas, Milovan, 57
do no harm, 288
dogma, 269, 274
dollar dependency, 53
Dollar Hegemony , 39, 60, 67, 75, 79 , 166
Dollar Standard , 29, 79
dollar’s exchange rate, 189, 351
dollarized, 123, 285
Domesday Book , the great land census of England and Wales (1086), 167
domestic currency, 116
domestic debts, 69, 85, 108, 124
domestic economic surplus, 177
domestic food production, 246
domestic law, 213
domestic money, 108, 116
domestic private sector, 194, 232
don’t think of an elephant, 20
Donbass (Ukraine), 341
Donbass (Ukraine), 341
dot.com bubble, 44
dot.com crash of 2000, 7
double money at 8%, 203
double taxation, 171
Doublespeak , 6, 20, 79 , 87, 168, 196
Doubling Time , 61, 79 , 84, 93
down payment, 33, 70, 101-102, 312
downsize, 34, 312
downsizing of industry, 321
downsizing, 14, 42, 132, 218-219, 317, 321
downturns, 46-47, 97, 258, 293
downward austerity spiral, 73
downward spiral, 35, 37, 265, 283, 288, 294
DPI (Disposable Personal Income), 54, 64, 78 , 84, 129, 153, 168, 222,
314-315
Draghi, Mario, 189
Drexel Burnham, 132
drive to free economies from unnecessary charges, 303
drone and pauper element in the state, 212
drug dealers, 92, 351
“dry” exchange, 30
Duma Parliament, 147
dumbed-down ahistorical economics, 284
dummy affiliates, 222
duress, 131, 142
Dutch Disease , 79 , 81
Dutch Finance , 80
dynamic system, 176
dynamics of debt, 20, 284
dynamics of greed, 111
Dyson, Freeman J., 278, 289
Dystopia , 80 , 121
dystopian financialized oligarchy, 239
E
early investors, 180
Earned Income , 84 , 328
earning power, 187
earnings paid out as dividends, 51
earnings per share, 101
earnings, 15, 34, 40, 50-51, 75, 83, 92, 101, 138, 183-184, 208, 218, 252-
255, 276, 281, 316-318, 332, 343, 350-351
easier bank credit, 45, 77, 227
East India Company, 123, 197, 328
easy credit, 44, 257
easy debt, 98
easy money, 7, 97, 262
Ebbers, Bernard, 116
Ebitda , 51, 83 , 97, 100-101, 168, 178, 183, 208, 253, 255, 316-317
ECB (European Central Bank), 14, 92, 142, 161, 189-190, 229-230, 331,
339-340
economic activity, 46, 80, 147, 165, 169, 182, 216, 263, 286, 306-307, 309
economic analysis, 58, 91, 146, 299-300, 306
economic and demographic death, 270
economic and ecological collapse, 304
economic balance and personal solvency, 131
economic base, 187
economic choice, 54, 125
economic class status, 153
economic collapse, 214, 217, 270, 296-297
economic deception, 143
economic development, 66, 144, 227, 286, 308
economic disaster, 238
economic distress, 261
economic downturns, 97
economic dukedoms, 53
economic dynamics, 91, 94
economic efficiency, 153
economic error, 120, 248
economic fiction, 10-11, 99, 333
Economic Forecasting , 27, 46, 84 , 90, 97, 108, 115, 124, 133, 178, 180,
205
economic growth by appropriate regulation, fair taxation and public
spending and investment in infrastructure, 224
economic growth, 20, 61, 71, 96-97, 178, 218, 224, 231, 243, 254, 268, 284,
292, 303, 308, 316, 319, 321, 333
economic head start, 308
economic history, 21, 224, 227, 267, 279, 284, 308, 321, 325, 352
economic ignorance, 251
economic importance, 165
economic inequality, 104, 224
economic liability, 60
economic life, 73, 207, 242
economic logic, 120, 149
economic methodology, 11, 249, 291
Economic Miracle , 59, 70, 85 , 108, 124
economic models, 8, 11, 54, 285, 292
economic overhead, 58, 120
economic pedagogy, 277
economic philosophers, 296
economic philosophy, 1964, 146
economic polarization, 19-20, 80, 93, 103, 108, 142, 166, 186, 222, 224,
227, 231, 249, 298, 302
economic polarization, not prosperity, 231
economic prestige, 288
economic pyramid, 6, 41, 57, 110, 150, 155, 191, 232, 320-321
economic rationalization, 251
economic rent is extractive, 252
Economic Rent , 3, 7-9, 11, 15, 52-53, 55, 58, 65, 67, 76, 85 , 87, 89, 91,
93-94, 96, 99, 105, 107, 112, 114, 119, 127-128, 138, 140, 144, 147-148,
151, 160-161, 165-166, 168, 174-175, 178, 181, 183-185, 188, 194, 197-
202, 208, 210, 221, 224, 229, 232, 237, 241, 246, 249, 252, 254-255, 259-
260, 264, 267, 291-292, 295, 301-303, 317, 326-328, 341, 346-347
economic restructuring, 150
economic returns, 277, 280
economic sanctions, 268
economic science, 169-170, 225, 252, 267, 305-306
economic self-indulgence, 80
economic self-sufficiency, 237
economic shrinkage, 35, 72, 96
economic stagnation, 214, 217
economic vocabulary, 14, 267
economics discipline, 6, 88, 169-170, 242, 268, 284, 321
economics of abundance, 185
Economics of Innocent Fraud (2004), John Kenneth Galbraith, 126
economics students, 306
Economics , 1, 3-18, 20, 22-24, 26-28, 30-36, 38-40, 42-44, 46, 48, 50, 52-
56, 58, 60-62, 64, 66-68, 70, 72-74, 76-82, 84, 86 , 88, 90, 92-96, 98, 100,
102, 104, 106, 108, 110-112, 114-118, 120-122, 124-128, 130-134, 136,
138-142, 144, 146, 148-152, 154, 156, 158, 160, 162-166, 168-170, 172,
174-176, 178, 180-182, 184-186, 188, 190-192, 194, 196, 198, 200-202,
204, 206, 208, 210-212, 214, 216-236, 238-240, 242-252, 254, 256, 258,
260, 262, 264, 266-268, 270-292, 294, 296-298, 300, 302, 304-310, 312,
314, 316, 318, 320-322, 324-330, 332-334, 336-338, 340, 342, 344-352,
354
economies can be made lower-cost, 318
Economist , 5, 8-9, 12, 15, 17-18, 21, 23-24, 28-31, 39, 42-43, 51, 53, 55-
56, 59, 77-79, 81, 86 -88, 90-92, 95-97, 105, 108, 111, 119-120, 124, 126,
133, 138-141, 148, 150-151, 154-155, 157, 162-163, 170, 176, 178, 182,
199-200, 207-210, 217, 221, 224, 227, 239, 241-242, 247, 254, 273-274,
276-278, 284-285, 287-288, 291-292, 294-295, 297, 300, 303-304, 306-
307, 309, 313, 317, 320, 323, 325-329, 331, 333, 335, 339, 350, 352
economy at large, 6, 45, 50, 88, 103, 147, 155, 191, 198, 201, 210, 266,
292, 320, 326
economy of abundance, 5, 31-32, 89, 124, 176
economy of high wages doctrine, 31-32
economy-wide expansion of debt, 166
economy-wide shock, 262
economy’s most productive individuals, 182
economy’s political shape, 285
economy’s surplus, 71
education loans, 71, 183, 218, 346
Education , 16, 19-20, 54, 65, 71, 74, 87 , 89, 93, 102-103, 120, 122, 125,
141, 148, 150, 153, 155, 166, 183-184, 186, 191, 193, 217-218, 238, 245,
259, 295, 301, 311-312, 314, 321, 334, 345-346
educational curriculum, 19, 267
Efficient Market Hypothesis , 76, 87 , 91
efficient mode of production, 150
egalitarianism, 227
ego-driven luxury, 269
Egypt’s priesthood, 203
Egypt’s pyramids, 65, 187
Egyptian, 69, 187, 203, 349
eight-percent (8%) annually, 148
election discussion, 179
electric companies, 339
electric utilities, 288, 296
electricity, gas and phone bills, 168
elegant theories, 273, 307
eliminating staff and product lines, 208, 317
elites, 5, 21, 23, 57, 60, 63, 66, 155, 215, 245, 270, 281, 296, 300
Emanuel, Rahm, 344
embezzling, 92, 351
emergency room nurses in Texas, 190
emigrate, 176, 219, 226, 248, 268, 283, 336-337, 340
emigration, 34, 49, 52, 91, 93, 212, 274, 279, 283, 287
emperor, 66-67, 89, 99, 174, 320
emperors of finance, 67, 89, 99
empire building, 28, 123, 129
empires, 57, 66, 234
empirical breadth and measurement, 273
empirical observation, 308
Employee Stock Ownership Plans (ESOPS), 137, 174, 260, 332
employer contributions to 401Ks, 208
employers, 32-33, 54, 58, 70, 76, 93, 98-99, 137-138, 145, 149, 152, 174,
194, 217, 226, 260, 316, 342, 347
enable banks, 230, 262-263
Enclosure of the Commons, 181
End of History , 19, 55, 88 , 94, 96, 113, 121, 142, 155, 184, 214, 223, 239,
321
End Time , 89
energy theory of the value of goods and services, 210
energy-driven society, 46
enforce payment of debts and contracts, 225
Engels, Frederich, 149-150
engineering coefficients, 308
engineering, 7, 22, 25, 44, 50-51, 101, 141, 153, 177, 208, 248, 278, 308,
316, 319-320
England, 9, 30-31, 52, 56-58, 60, 86, 90, 97, 112, 167, 186, 263, 308, 327,
329, 332, 339
England’s Norman conquerors, 57
enhanced interrogation, 169
enlightenment reform, 196
Enlightenment , 9, 16, 19, 55, 58, 89 , 196, 296, 304
Enquiry Concerning Human Understanding (1748), David Hume, 286, 289
enrich creditors by impoverishing debtors, 297
enrichment, 29, 257
Enron accounting fraud, 28, 99, 116, 121, 148
enserfed population, 166
enterprise, 27, 34-35, 42, 50, 52-53, 56, 63, 72, 89, 99, 110, 117, 134, 136,
155, 160, 177, 186, 198-199, 223, 227, 234, 256, 279, 283, 328, 332, 335
entropy theory, 274
Environment , 47, 71, 88, 90 , 93, 146, 156, 160, 166, 223, 273-274, 279,
325
environmental cleanup costs, 280
environmental pollutants,
environmental pollution, 46, 71, 90, 105, 156
Epiphanes, 203
epistemological dimension, 276
epithets, 180
equality of rights, 150
equilibrium analysis, 176
equilibrium position, 307
Equilibrium , 46, 54, 59, 74, 78, 84, 90 , 94, 105, 120, 173, 176, 226, 279,
283, 289, 293-294, 307-308, 310
equitably, 224, 226, 239
equity prices, 177, 260
equity, 37, 39, 44-45, 70, 78, 98, 101, 132, 158, 166, 177, 183, 205-207,
210, 231-232, 242, 260, 312, 315, 345-346
equivalent interest charge, 162
Erie Canal, 96
eroding corporate profits, 177
erosion of purchasing power, 195
Errors and Omissions , 92 , 351
escape route, 276
Essays : Of Usury (1597), Francis Bacon, 238
established confidence, 215
Estonia, 336-337
eternal problem of all civilizations, 56
ethical individuals, 125
ethnic and religious hostility, 338
ethnic identity, 345
ethnic, 57-58, 73, 179, 337-338, 345
ethnically divisive issue, 336
Euphemism , 13, 22, 43, 54-55, 63-64, 92 , 105, 169, 173-174, 180, 183,
193, 211, 213, 245, 296, 313, 351
euro, 109, 213, 332, 338
Eurogroup, 268, 270
Europe’s 1848 revolutions, 41, 149
Europe’s colonies, 237
European Central Bank (ECB) , 14, 37, 52-53, 75, 92 , 121, 125, 142, 161,
189, 213, 229-230, 268-269, 288, 331-332, 339-340
European Commission, 14, 339
European fascism, 167
European health systems, 151
European project, 269
European Union, 85, 125, 229
Eurozone “Troika”, 14
Eurozone debtor countries, 92
Eurozone, 14, 34, 43, 53, 72, 80, 92, 100, 109, 170, 175, 190, 196, 263,
268-269, 321
“Euthanasia of the rentier ” , 3, 83, 92 , 198, 224
Everett, Alexander, 30
evidence, 9, 67, 74, 287
evil, 60, 120, 133, 213, 251, 344
evolutionary struggle for existence, 59
evolving forward, 180
excess dollars, 79
excessive returns, 218
exchange rate, 30, 51, 109, 116, 189, 273, 283, 296, 332, 351
exchequer bonds, 123
excise taxes, 221, 280, 312
excuse to centralize control of government in the executive branch, 244
executive salaries and bonuses, 259
existing assets, 50
existing institutional structures, 300
existing machinery, 97
existing mortgage debtors, 187
existing trends, 274
exotic instruments, 343
expand or contract like a balloon, 297
expectations, 100, 124, 297, 304
expense of labor and of debtors, 202
experimental reasoning, 286
experts, 24, 271
exploit the periphery, 246
Exploitation , 11, 29, 35, 55, 79, 92 , 119, 127, 145, 149, 151, 202, 211,
221, 223, 230, 299, 318, 321, 325, 342, 347, 352
exponential creation of new credit, 243
Exponential Functions , 93, 146; See Compound Interest , 60; Doubling
Time , 79; and Rule of 72 , 203
exponential growth of debt, 21, 167
export earnings, 92, 332, 350-351
expose, 107, 138
expropriation, 126
expurgation of the history of economic thought, 304
extend and pretend, 269
Externality , 60, 73, 90, 93 , 95, 217, 219, 229, 242, 292
extortion, 165
extortionate interest rates, 122
Extractive Economy , 8, 15, 22, 49, 90, 93 , 99, 101, 103, 105, 115-116,
123, 145, 178, 180, 182, 252, 276, 299, 317-319, 324
Extremist , 94 , 277
F
face value of mortgages, 232
Factoid , 95 , 124, 134, 151, 231-232
Factor of Production , 57, 90, 95 , 176, 186, 224, 256, 293, 328
factor-price equalization theorem, 169, 274, 305, 307
facts do not back austerity, 272
factual history, 18
Failed State , 96
failure to correlate, 97
failure to understand and change the system, 283
fair and balanced, 52
fair and sustainable economic growth, 224
fair laws and regulations, 90
fair pricing, 125
fair societies, 111
faith in asset markets, 170
faith that economies work fairly and equitably, 224
fake news, 232
fakir, 17
Fallacy, Economic , 96
falling prices, 190
Falling Rate of Profit , 75, 96 , 253
false assumptions, 17, 94, 272
False Correlation , 97
false invoices, 92
false metaphor, 206
false progress, 184
false promises, 183
false prosperity, 98
false weights and measures, 159, 330
Fama, Eugene,170
family budgets, 5, 78
family savings, 185
Fannie Mae, 263
fantasies, 227, 266
farm productivity, 77, 145, 275
farmers, 190-191, 227, 330, 332
Farrell, Greg, 289
fast-growing companies, 208
father-to-son inheritance, 172
favorable location, 198
favorable tax treatment, 101
fear, 22, 217, 226, 230, 287, 303
Fed’s policy, 190
Fed’s two-dimensional depiction, 248
Federal Deposit Insurance Corporation (FDIC), 38, 262
Federal Housing Authority (FHA), 263, 346
Federal Insurance Contributions Act (FICA), 44, 78, 98 , 102, 104, 168,
195, 209, 314-315, 343, 346
Federal Reserve System (the Fed) , 43, 50, 97 , 156, 190, 230, 248, 262-
263
Federal Savings and Loan Insurance Corporation (FSLIC), 162
feedback, 90-91, 176, 219, 247, 294
feeling of inevitability, 321
fees for public services, 222, 225
fertile soils, 76, 85, 197, 201
feudal epoch, 225, 303, 326
feudal landlords, 207, 210
feudal lord, 32
feudal lordship, 88
feudal privilege, 90, 184, 200, 211, 225, 325
Feudalism , 5, 19, 59, 63, 73, 89, 98 , 100, 105, 149, 166-167, 180, 202,
207, 210, 214, 291, 293, 303-304, 319, 327, 333, 347
FHA-insured mortgage, 102
fiat money, 53
FICA (Federal Insurance Contributions Act) , 44, 78, 98 , 102, 104, 168,
195, 209, 314-315, 343, 346
FICA taxes, 44, 78, 98 , 102, 104, 168, 195, 209, 314-315, 343, 346
fictitious book losses, 173
fictitious capital, 3, 11, 69, 95, 97-99, 101, 103, 105, 107, 148, 183, 235,
300, 311, 353
Fictitious Capital , 3, 11, 69, 95, 98 , 101, 103, 105, 107, 148, 183, 235,
300, 311, 353
Fictitious Costs , 99 , 244
fictitious economic theories and vocabulary, 276
fictitious loss, 128
Fiduciary Responsibility , 99 , 124
fields his own army, 341
fighting inflation, 98, 125
finance budget deficits, 43, 80, 124, 226
Finance Capital (1910), Rudolph Hilferding, 99
finance capitalism has superseded industrial capitalism, 105
Finance Capitalism , 51, 55, 92, 97, 99 , 105, 160, 176, 213, 234, 243, 258,
311, 319, 321, 339, 353
finance has become the new mode of warfare, 283
finance ministers, 265, 268
finance ministries, 87, 269, 285, 287
finance should be used to help the economy grow, not be parasitic, 345
finance-dominated governments, 268
finance, insurance and real estate (FIRE Sector), 8, 15, 57, 103, 232, 295,
312, 346-347
financial and property relationships, 141
financial breeding grounds, 287
financial bubbles burst, 232
financial cartel, 96
financial centers, 16, 24, 49, 54, 109, 160, 203, 215, 312
financial charges, 70, 100, 138, 313, 320
financial class, 6, 10, 14-15, 57, 92, 126, 152, 176, 182, 224, 292, 317, 333
financial conquest of Greece since 2010, 265
financial crises, 85, 149-150, 231, 292
financial crisis (2008), 52, 76, 262; see also Crash (2008) financial cycle,
102, 154
financial derivatives, 343
financial dominance, 31, 105
financial donor class, 297
financial dynamics, 91, 122, 155, 285
financial emperor has no clothes, 320
Financial Engineering , 7, 44, 51, 101 , 208, 248, 316, 319-320
financial fees, 93, 100, 167, 232, 259, 294
financial fortunes, 167, 286, 292
financial insiders, 45
financial instruments, 76, 191
financial lobbyists, 21, 157, 159, 268, 281, 320
financial panic, 1907, 97
financial partners, 210
financial pollution, 286
financial populism, 133
financial position, 45
financial press, 245
financial raiders, 122, 178, 318
financial sector ( See also: FIRE Sector), 7-8, 20, 34, 38, 40, 42, 58, 72, 79,
88, 92, 95, 99-101, 111, 132, 142, 154, 162, 165, 177-178, 185, 190, 196,
201-202, 208, 210, 230, 248, 253, 258, 263-264, 266, 276, 298-299, 301,
304, 324-325, 331, 333-334, 350, 352
financial securities, 50-51, 78, 175, 202, 207, 231, 245, 257, 285-286, 315-
316
financial short-termism, 123, 243, 284
financial success, 251
financial super-cycle, 258
financial technocrats, 70
financial textbooks, 332
Financial Times , 162-163, 289, 340
financial wealth, 125, 129, 201, 226, 252
financial weaponry, 276
Financialization , 33, 41, 55, 101 , 142, 148, 161, 178, 184-185, 200, 214,
218, 223, 268, 302, 311-312, 314, 316, 318-320, 342
financialize pensions, 316
financialized economy, 73, 77, 93, 99, 102, 154
fine art as rentier trophies, 269
fine art, 207, 269
Finnish consumer goods, 41
fire hydrants, 200
FIRE Sector (Finance, Insurance and Real Estate) , 3, 27-28, 40, 42, 54,
57, 72, 74-75, 78, 93-96, 103 , 109, 122, 127, 129, 146, 153-154, 166, 168,
170, 173, 175, 180, 194-197, 199-200, 207, 212, 216, 218, 221-222, 225,
231-233, 242-243, 252-256, 268, 288, 299, 302, 313-314, 316-317, 319,
321, 347
FIRE-sector lobbyists, 316
FIRE-sector tsunami, 347
fire, 3, 8, 15, 19, 24, 27-28, 40, 42, 54, 57, 64, 72, 74-76, 78, 93-96, 102-
103, 109, 122, 127, 129, 146, 153-154, 162, 166, 168, 170, 173, 175, 180,
194-197, 199-201, 207, 212, 216, 218, 221-222, 225, 231-233, 242-243,
249, 252-255, 257, 264, 268, 288, 299, 302, 312-314, 316-317, 319, 321,
338, 346-347
fiscal austerity, 97, 106, 226
fiscal deflation, 34, 103, 209, 222
fiscal drag, 10, 70, 80, 103, 156, 222
Fiscal Surplus (AKA Fiscal Drag) , 103 -104, 156, 209
Fisher, Irving, 70, 80, 136, 159, 207
fittest, 51, 213
five dollars ($5) a day (Henry Ford), 54
fixed capital formation, 50
fixed capital, 50, 65
fixed commission rate, 177
fixed retirement income, 245
flags of convenience, 171, 222, 230, 351
Flat Tax , 42, 104 , 110, 121, 141, 145, 241, 260, 291, 335
flexible prices, 214
flexible unregulated price-setting markets, 147
flow of commissions, 343
flow of interest and dividends, 197
flow of rent, 165, 302
flow-of-funds statistics, 281
flows of output, 286
focus on the One Percent, 302
folding money, 156
food dependency, 199, 246, 275
food dumping, 38
fool’s paradise, 98
for-profit colleges, 183
Forbes, Steve, 104, 335
forced euthanasia, 151
Forced Saving , 104 , 121, 168, 206, 314
Ford, Henry, 54
forecasting models, 84
Foreclosure , 61, 72, 99, 104 , 106, 126, 139, 166-167, 176, 182, 185, 212,
258, 262, 297, 319, 339
foreign bank loans, 115
foreign banks, 335, 337, 341
foreign currency transfers, 127
foreign currency, 79, 127, 158, 283
foreign debt service, 34, 38, 116
foreign exchange rate, 51, 109, 273
foreign investment inflows, 193
foreign investors, 115, 283, 328, 335
foreign luxuries, 231
foreigners, 243, 288, 332, 340
foreseeable future, 321
foresight, 122
forestry, 197
forests, 34, 181, 186
forms of insanity, 126
fortune 100 companies, 343
foundations cut grants, 190
Fourier communities, 294
Fourth Factor of Production, 96, 176, 186, 224
Fragility , 104 , 180
France, 9, 16, 28, 44, 54, 58, 65, 86, 109, 124, 139, 165, 172, 177, 208,
275, 286, 327, 329, 339, 345
France, Anatole, 54
Frankfurt, 16, 109, 263, 331, 339
fraud and cheating, 216
fraud, 4, 8, 11-12, 17, 28-30, 35, 43, 52, 66, 76, 87, 110-111, 119, 121, 126,
129, 132-134, 141, 157, 183, 194, 211, 216, 219, 223, 227-230, 239, 243,
252-253, 262, 266, 269, 271, 273, 275-277, 279, 281-285, 287, 289, 300,
324
fraudsters, 42, 87
Fraudulent Conveyance suit, 342
fraudulent loans, 161
fraudulent over-lending, 154
Freddy Mac, 102
free choice, 63, 239
free hand, 167, 226
free labor, 65, 149
free line of credit, 52
Free Lunch , 5, 13, 22, 27, 54, 70, 74, 85-86, 92, 105 , 107, 200, 225, 232,
237, 241, 246, 253, 319, 324, 326, 333
free lunchers, 105, 175 327
free lunches and privilege, 196
Free Market , 6, 14-17, 20-23, 28, 40, 53-56, 66, 76, 79, 85, 92, 94, 105 ,
108-110, 117, 119, 124, 137, 142, 147-148, 167, 169-170, 201-202, 211,
215-216, 224-226, 239, 259, 268-269, 274, 277, 280, 287, 294, 303-304,
312, 325, 327-329, 331, 338
free of land rent, 105
free reserves, 248
free society, 9, 59, 89, 92, 154, 167, 198, 210, 291, 293, 303, 319, 327, 333,
345
free speech, 64
free trade theory, 52, 294
free trade with India, 211
Free Trade , 30-32, 52, 58, 105 , 120, 142, 169, 186, 199, 201, 210-211,
274, 291, 294, 300
free-market models, 93
freedom from debt overhead, 108
freelancers, 153
freely marketable, 140
freeze, 262
French Enlightenment, 16
French rentes (government bonds), 197
French, 16, 28, 65, 80, 89, 94, 138, 177, 185, 197-198, 205, 207, 210, 216,
280, 327-328, 332, 339-340
Freud, Sigmund, 22
Friedman, Milton (1912-2006) , 53, 105 , 113, 158, 168, 170, 246, 296,
309, 324, 332
fringe groups, 136
Frisch, Ragnar, 169, 309
front-running, 180
fruits of economic growth, 254
FSLIC (Federal Savings and Loan Insurance Corporation), 162
fuels, 156, 280
Fugger financial family, 60
Fukuyama, Francis 88
full-capacity operations, 46
full-employment economy, 154
function more profitably, 258
functionless investors, 198
funded out of the general budget, 261
funerary cult, 187
G
G-20 Meetings, 339
Gaffney, Mason, 204
gaining (or losing), 294
Galbraith, James, 14, 24, 288, 339
Galbraith, John Kenneth 126
gamble, 5, 161, 273, 340
gas chambers, 29
gas exports, 79
gas pipeline, 338
gas rights in the Black Sea, 341
gated communities, 167, 270
Gazprom, 338
gearing, 187
Geithner, Tim, 43
General Electric, 343, 350
general level of prosperity, 112, 264
General Motors (manufacturing and finance), 28, 343
general prosperity, 114
General Theory of Interest, Employment and Prices (1936), John Maynard
Keynes, 92
general welfare, 109
generation, 28, 96, 107, 125, 133, 227, 264, 278, 284, 310, 321
gentrification, 344, 345
geometric growth, 60-61, 146
George, Henry (1839-1897) , 8-9, 15, 94, 98, 107 , 112-113, 141, 154, 177,
208, 277, 301
Georgetown University, 334
German banks, 339-340
German communists, 151
German Economic Miracle , 70, 108
German historical school, 293
German hun, 22, 56
German municipalities, 116
German reparations problem, 308
German reparations, 34, 59, 98, 116, 121, 135, 170, 288, 308
Germany, German, 19, 31, 35, 56, 69, 85, 90, 97, 104-105, 108, 116, 124,
135, 150, 153, 176, 206, 219, 220, 225, 227, 232, 275, 326, 331, 333, 338,
340
Germany’s Die Linke party, 338
Germany’s word of the year – postfaktisch (2016), 232
get rich, 6, 9, 43-44, 121, 278, 325
getting customers to use its credit cards, 343
gift exchange, 65, 147, 214, 234
gig arrangements, 152
GIGO (Garbage In, Garbage Out) , 33, 108 , 151
Gilded Age, 19, 111, 184, 269
GINI Coefficient , 108
giveaway prices, 137, 186
giveaways at insider prices, 336
glaciers melt, 179
Glaziev, Sergei, 147, 162
global bankers, 283
global climate change, 30
global conglomerates, 229
global cosmopolitan class, 123
global economy is polarizing, 91
global economy, 10, 91, 115, 150, 246, 274, 285, 323, 333, 347, 353
global finance capital, 49
Global Fracture (new ed. 2005), Michael Hudson, 353
global investors, 246, 275
global linkages, 213
global production, 79
global warming, 46, 88, 90, 93, 105, 156, 179-180
global, 10-11, 30, 32, 46, 49, 53, 69, 79, 88, 90-91, 93, 105, 109, 115, 123,
150, 156, 166, 171-172, 179-181, 213, 224, 229, 235, 246, 266, 274-276,
283, 285, 287, 296, 304, 311, 323, 333, 341, 347, 353
globalization, 105, 201
globalized creditor leverage, 124
globalized world, 88
gluttony and greed, 209
gold bugs, 109
gold coins, 41
gold reserves, 41
gold sales, 38
gold-backed paper currency, 202
gold-exchange standard, 109
Gold , 38, 41, 53, 79, 86, 96, 108 , 116, 123, 156-158, 201, 214, 216
Goldman Sachs, 9, 75, 182, 197, 275, 287, 324, 343-344
good writeoff, 37
govern, 90, 142, 292
government bonds, 15, 44, 197
government borrowing, 125, 133
government budget deficits, 10, 52, 98, 109, 265
government bureaucracy, 57, 60, 228
government debts cannot be written down, 265
government guarantee mortgage loans, 346
government guarantees, 15, 102, 346
government policy, 12, 195, 224, 226-227, 308-310, 326
government waste, 174
government workers, 182
government-backed IOUs, 158
government-guaranteed debt leverage, 217
government-organized stock market bubbles, 286
Government , 5, 10, 12, 14-16, 19-20, 22-24, 31, 38-42, 44, 46, 51-55, 57,
60, 63, 66-67, 69, 72, 74, 76-78, 84, 86-89, 91, 96-100, 102, 104-106, 109 ,
114, 120, 123, 125-126, 128-129, 133, 142-143, 145, 147-148, 150-151,
155-158, 161-162, 167, 170, 174-175, 177-178, 180-184, 186, 194-195,
197-203, 207, 209-210, 212-213, 215, 217-218, 221-222, 224-228, 230,
233, 237-239, 242-244, 255-256, 259-261, 264-266, 269, 279, 285-286,
288, 292-293, 295-296, 301, 308-310, 314-316, 318, 320, 324-331, 333-
337, 339, 346-347, 351
government’s budget deficit is (by definition) the private sector’s surplus,
10, 156
government’s historic role, 224
governments created and sponsored the earliest markets, 225
governments do (and should) create money, 156
governments give value to money, 215
Grabitization , 3, 107, 110 , 147, 168, 177, 181, 270, 297, 334
graduate students, 300
Graeber, David, 225, 234, 330
grain as payment, 158
grain prices, 84
grain, 27, 75-76, 84-85, 146-147, 158, 209, 214-216, 225
Gramsci, Antonio, 119
Great Depression, 80, 135
great fortunes, 29, 66, 253
Great Moderation , 34, 44, 99, 108, 110 , 178, 180, 233, 283, 320
great recession, 30
greater fool, 183
greater injury, 231
greatest good, 16
Greece and Rome, 56, 159
Greece, 14, 20, 22, 34, 38, 53, 56, 60, 67, 69, 72, 89, 92, 100, 121, 124-125,
159, 161, 202, 211, 213, 219, 230, 244, 265, 268-270, 274, 280, 288, 321,
326, 331-332, 336, 338-340, 342, 352
Greed , 33, 42, 111 , 115-116, 120-123, 126, 209, 212, 244
greedy, 29, 297
Greek drama, 116
Greek economy, 15
Greek voters, 229
Greenspan, Alan (1926-) , 44, 59, 98, 110, 111, 134, 181, 194, 196-197,
202, 206, 230, 234, 245, 320
Gress, David, 56
grip of the IMF, 246
gross rent, 197
gross saving, 185, 282
gross wages, 207, 315
Groundrent , 3, 28, 85, 96, 98, 107, 112 , 114, 140, 142, 144-145, 149, 154,
166, 177, 197-198, 208, 325, 327
group self-interest, 58
Grover Norquist’s recommendation, 201
grow their way out of debt, 282
growth in debt overhead, 273
growth in nature, 205
growth in U.S. asset values, 173
growth of debt, 21, 34, 46, 167, 297
growth, 18, 20-21, 23, 34, 46, 54, 60-61, 71, 84-86, 93, 96-99, 101, 114,
123-124, 126, 146, 150, 167, 173, 178-180, 188, 196, 203, 205, 214, 218,
224, 231, 233, 237, 242-243, 246, 254, 268, 273, 276, 281, 284, 287, 292,
296-299, 303, 308, 316, 319-321, 324, 333
grupo conglomerates, 342
Guatemala, 23-25
guilder, 79
gullible book knowledge, 141
Gunder Frank, André 237
H
Habsburgs, 60
Haiti, 124
half of ESOPS are wiped out, 342
half-century-long policy of austerity, 283
Half-Life , 113
halfway house, 154
Halliburton, 177
Hamilton, Alexander, 186, 215
Hammurabi’s Babylonian dynasty, 69
handmaiden to oligarchy, 142, 200
hard currency, 97, 116
hard-working families, 43
Hardin, Garrett, 229
harmful, expedient or inexpedient, 133
harmoniously, 239
harmony of interests, 150
Harper’s , 7-8, 12, 354
Harrison, Fred, 117
harsh judges, 231
harshly rewritten recent bankruptcy code, 217
Harvard, 75, 144, 330, 352
harvest, 35, 65-66, 158, 178, 214, 216
Have-Nots , 113
Haves , 113
Hayek, Frederick, 18, 23, 42, 186, 201
health insurance, 168, 186, 215, 218, 222, 314, 344
healthcare costs, 103
healthcare monopolies, 32, 93
healthcare, 32, 42, 54, 64, 78, 93, 120, 129, 148, 152, 155, 160, 168, 191,
193, 196, 219, 224, 255-256, 298, 312, 314, 316, 320
heavy industry, 99, 153
Heckscher-Ohlin-Samuelson trade theory, 276
hedge funds, 190-191
Hegel, 146, 162
heirs or divorcees, 245
Hellevig, Jon, 170
Helmsley, Leona, 231, 253
Henry Clay Whigs, 210
Henry George Theorem, 107, 113 , 141, 154
herds of animals tend to taper off, 84
hereditary class ownership, 197
hereditary land rents, 95
hereditary privileges of aristocracies, 5
Hersh, Seymour, 25
hierarchical structure, 172
hieroglyphics, 203
high interest rates, 92, 125, 352
high living standards, 334, 337
high management salaries, 168, 186
high underwriting fees, 223
high-interest credit card debt, 37
high-paying appointments, 289
high-status neighborhoods, 112
higher cost of living and doing business, 181
higher dividend payout, 34, 101, 122, 243, 316
higher economic activity, 80
higher interest rates, 125, 134, 190-191, 230
Higher Learning in America (1918), Thorstein Veblen, 141, 242
higher living standards, 284
higher minimum wage, 105
higher real estate taxes, 264
higher-cost producers, 86
higher-rise buildings, 198
highly regimented uniformity, 239
Hilferding, Bruno, 99
hiring, 100, 102, 125, 145, 199, 230, 258, 263, 316, 318
historians, 31, 41, 73, 216, 299
historical context, 73, 306
historical grounding, 273
historical reality, 124
Historical School, 31, 176, 293
history is written by the victors, 14, 21
history of debt, 349
history of economic thought, 9, 18, 21, 201, 227, 284, 303-304, 309, 321,
325, 327, 352
Hitler invasion of Poland, 29
Hitler, Adolph, 29, 151
hoarding, 185, 207
Hobbes, Thomas, 25
Holder, Eric, 228
Holland, 309
home equity lending, 206
home equity loan, 206
home ownership rates, 191
home property taxes, 222
homebuyers, 34, 44, 54, 71, 78-79, 100, 102, 159, 179, 187, 191, 213, 264,
315
homeland industry, 60
homeowners are not allowed to claim depreciation, 253
Honduran coup, 153
honest purity and weight, 159
Hoover, Herbert, 344
hope and change, 73, 261, 344
hope for advancement, 122
hope that credit will make one rich, 179
Horton, S. Dana, 96
Horton, Scott, 25
hospital loans, 37
Host Economy , 115 , 181, 323
host’s body, 175
host’s brain, 175, 323
hostage, 113, 177
hot money, 92, 172
house rent, 197
household accounts, 167
household management, 86
housing and education, 65, 166
housing bubble, 174
housing charges, 64, 78, 314
housing prices, 33, 45, 140, 222, 232, 263, 311, 316, 346
how a parasite takes over a host, 323
how debt doubles, 61-62
how interest rates were set (2500 BC-1000 AD), 220
how long a loan or debt will take to double at a given rate of interest, 203
how much can be taxed, 282
how society is organized, 119
how the world works, 119, 175, 256, 280
how wealth is obtained, 239
Hubris , 3, 29, 111, 115
Hudson Bubble Model , 4, 11, 51, 77-78, 115 , 168, 195, 227, 233, 311,
313, 315, 317, 319, 321
Hudson Institute (no relation), 41, 349
human capital, 93, 183, 218
human rights, 212
humanitarian bankruptcy laws, 226
humanitarian treatment, 14, 52, 69, 226
humanities, 141
Hume, David, 286
Humphrey, Hubert, 142
Huntington, Samuel, 55
Hussein, Saddam, 24
hydrocarbon fuels, 156
Hyperinflation , 113, 116 , 124, 126
hypocognizant democracy, 19, 116
Hypocognizant , 19, 116
hypotheses, 242, 272, 275
I
I do not recall, 121
Icesave bank, 223
ideal situation, 173
idealize “the market”, 224
identity politics, 57-58, 73, 179, 337
ideological censorship, 276
ideological preconceptions, 108, 151
ideologues, 23, 53, 147, 170, 201, 226, 276, 324, 327
ideology of scarcity, 185
ideology to absolve banks, 167
Ideology , 4-5, 11, 14, 18, 20, 23, 31, 40, 46, 54-55, 74, 91, 94, 108, 113,
119 , 125, 135, 150-151, 157, 166-167, 170, 184-185, 199, 217, 222, 280,
287, 291, 293, 295-297, 299, 301, 303, 319, 325, 330-331, 345
Idiot Savant , 59, 120 , 133, 141, 143, 175, 297
Ig Nobel Economics Prize, 66
Ignorance , 3, 9, 33, 52, 87, 120 , 129, 137, 141, 170, 225, 242, 251, 297
illegal drug sales, 66
illegal profits, 351
Illich, Ivan, 87
illusion of objectivity, 170
illusion of rising to higher status, 152
IMF European staff resignations, 340
IMF Riots , 35, 121 , 153, 283
IMF Special Drawing Rights (SDRs), 109
IMF’s international financial statistics, 92
immigration, 29, 86
Immiseration , 121
Impatience , 35, 121 , 125, 278
Imperialism , 67, 80, 123 , 129, 211, 328, 353
Implanted Memory , 95, 116, 124
implicit business plan, 304
implicit threat, 340
import licensing and quotas, 199, 246
imports, 76, 79, 116, 186
impoverished labor, 226
imputed rent, 254
in practice, 30, 110, 162, 171, 205, 208-209, 212, 229, 231, 239, 258, 263,
271, 281, 306, 341
income and wealth brackets, 196, 260-261
income distribution chart, 178
income tax, 50, 75, 78, 86, 128, 132, 172-173, 184, 196, 198, 208, 222,
256-257, 260, 264, 312, 314-315, 320, 336, 346
incompatibility, 63, 124
increase in access prices, 159
increase in liabilities, 244
increases in inequality, 227
increasing debt, 226, 311
increasing home ownership, 174
Increasing Returns , 31, 78, 124 , 219
increasing the money supply, 263
indebted victims, 265
indebted voters, 190
Independence , 31, 71, 124 , 332, 334
independent central bank, 285
independent variables, 307
India, 53, 106, 123, 161, 188, 197, 211, 234, 328
indispensable nation, 142, 166
individual psychology, 278
individual savers and borrowers, 122
Individualism , 11, 42, 125 , 149, 227, 269, 287
individualistic society, 239
industrial and financial dominance, 31, 105
industrial banking, 184
industrial bourgeoisie, 149, 293
industrial capitalism at its most efficient, 294
industrial capitalism, 15, 19, 32, 51, 55, 65, 89-90, 99-100, 105, 128, 149-
150, 167, 177, 182, 210-211, 213, 294, 303, 318-319, 325, 333, 347
industrial capitalist, 35, 58, 303
industrial companies, 14, 99, 230, 343
industrial economy, 80, 90, 183, 252-253, 293, 318-319
industrial engineering, 51, 153, 177, 244, 316
industrial engineers
industrial exploitation of labor, 318
industrial infrastructure, 90, 341
industrial plant and machinery, 173
industrial profits, 19, 50, 149, 200-201, 216, 232, 256-257
industrial prosperity, 345
industrial strategists, 186
industrial viability, 65
industrialists, 30, 54, 58, 76, 149
industry and agriculture, 31, 105, 186, 275-276, 294
industry and labor, 201
industry, 8, 15, 19, 22, 29, 31-32, 36, 39, 51, 57, 60, 72, 78, 80, 86, 93, 99-
100, 103, 105, 109-110, 124, 132, 139, 145-146, 153, 155, 166-167, 171-
173, 177, 180, 183, 186, 199, 201, 208, 216, 222, 226, 229, 237, 242, 244,
275-276, 282, 294, 304, 311, 314, 319-321, 335, 338-339, 341, 343, 345,
347, 351
inequality, 30, 59, 91, 94, 102, 104, 120, 224, 227, 234, 274, 296, 298, 304,
315, 319
INET (George Soros’s group), 336
inflate capital gains in excess of interest rates, 70
inflated on credit, 110, 217
inflating asset prices, 6, 44, 245, 252, 311, 313-314
inflation of property and land prices, 173
inflation rate for asset prices, 313
Inflation , 3-4, 11-12, 14, 27, 30, 33-34, 40, 42, 45, 50, 64, 70, 73, 79-81,
92, 97, 98, 102-103, 106, 110-111, 115-116, 125 , 138, 146, 156, 158-160,
173-174, 176, 183, 187-188, 194, 214, 222, 229, 232, 235, 237, 243-246,
252, 263, 268, 277, 281, 287, 311-313, 319, 352
inflow, 38, 172, 180, 193, 282, 296
information technology, 32, 108, 153, 161, 218, 255, 294
infrastructure, 5-6, 8, 16, 19, 23, 30-32, 42, 51, 53, 60, 65, 67, 75, 80, 86,
88, 90, 96, 99-100, 109, 112-115, 120, 123, 125, 133, 142, 148, 150, 155,
161, 166-169, 176, 181, 184, 186-187, 198, 201-202, 204-205, 208, 210-
212, 223-226, 233, 255-259, 261, 266, 270, 285, 292-294, 296, 298, 303-
304, 312, 316, 318-321, 328, 330-331, 334, 339-341
infrastructure investment, 16, 30, 42, 96, 112, 114-115, 125, 186, 202, 204,
226, 255-257, 261, 292, 303
infrastructure monopolists, 32
inheritance, 77, 172, 206, 245, 302
inherited fortunes, 122
initial flush of asset-price inflation, 268
injured, 17, 231
Inner Contradiction , 3, 119, 121, 123, 126 , 129, 141, 213
Innocent Fraud , 126 , 141
innovation, 50, 56, 65, 256
Insanity , 126 , 288
insider dealing, 42, 66, 107, 110, 119, 128, 155, 177, 180-181, 225, 269,
273, 329
insider trading scandals, 132
instinct of workmanship, 33
Institute for Fraud Prevention (IFP), 30
institutional analysis, 302
Institutionalism , 87, 126 , 146
Institutionalist School, 31
insurance and pensions, 168, 314
insurance companies, 99, 160, 189-190
insurance industry, 345
insurance, 8, 15, 38, 57, 93, 98-99, 103-104, 127, 134, 152, 160, 162, 167,
186, 189-190, 195, 215, 218, 222, 232, 262, 295, 312-314, 340, 344-347
Insurance, insurers : See FIRE Sector , 103
insurers, 127, 340
intended, 52, 141, 228, 301, 320
interAlly World War I debts, 59
inter-governmental credit, 53
interest charges in excess of the legal maximum, 127, 238
interest charges, 28, 46, 51, 54, 61, 70-72, 80, 85, 100, 102, 111, 122, 127,
140, 170, 178, 183, 186, 205, 238, 253, 269, 282, 317-318
interest on interest, 61
interest payments, 6, 77, 128, 140, 143, 176, 253, 269, 317, 350, 352
interest rate owed on credit, 168
interest-only, 45, 154
Interest , 6, 15-16, 20, 22, 28-30, 33-35, 37-40, 42-47, 49-52, 54, 56-58,
60-63, 65-66, 69-72, 75, 77-80, 83-87, 90-93, 95, 97-104, 110-111, 114-
115, 120-122, 127 , 132-135, 140-141, 143, 145-151, 154-157, 159, 162,
165, 167-168, 170, 173-174, 176, 178-181, 183, 185-187, 189-192, 194-
195, 197-198, 203, 205-211, 214, 216-219, 222, 225-230, 232-233, 238-
239, 241-245, 247-248, 253-255, 257-260, 262-266, 269, 273, 275-277,
280, 282, 284-287, 291-294, 296, 301, 303-304, 308-309, 311-314, 316-
321, 324-325, 328, 330, 338-340, 349-352
Interest, compound : See Compound Interest, 60
Interest, Mortgage , 127
interlocking sets of assumptions, 242
intermediation society, 160
internal consistency, 133, 272
internal debts, 108
internal improvements, 31, 210
Internal Revenue Service (IRS), 45
International Bank for Reconstruction and Development (IBRD), 246
International Communist League, 149
International Court, 213
international economy, 169, 274, 289, 307
international investment and “aid”, 307
international law, 166, 256
international payments, 41, 296
international postage-stamp arbitrage, 180
international price competition, 294
International Scholars Conference on the Ancient Near East (ISCANEE),
330
international trade theory, 91, 294, 305, 352
internet service, 168
interrelated system, 274
intersection of trends, 72, 284
interview, 4, 10, 88, 106, 162, 323, 325, 327, 329, 331, 333, 335, 337, 339,
341, 343, 345, 347, 349, 353
intrinsic cost (value), 85
intrinsic value, 8, 87, 129, 138, 182, 210, 292, 295
invective, 51, 55, 94, 211
invert meaning of words, 14
investment bankers, banks, 51, 76, 160, 191, 223, 244
Investment , 8-9, 16, 19, 21, 23, 29-30, 33, 38, 41-42, 46, 50-51, 55, 63, 70,
72, 75-76, 79-80, 84, 92, 96, 98-102, 105, 109, 112, 114-115, 125, 128 ,
133, 138, 143, 146-147, 150, 159-160, 168, 172-173, 176-178, 180-184,
186, 190-191, 193-194, 198, 202-203, 205-211, 213-214, 216, 218, 222-
226, 232, 243-244, 248, 252-259, 261, 263, 268, 281-282, 284-286, 292-
294, 296, 298, 303, 307, 311-312, 316-318, 321, 323, 328
investments to modernize, 167
Investor , 7, 9, 11, 23, 28, 44, 50, 55, 70, 75, 87-88, 91, 115, 123, 128 , 137,
166, 176, 180, 183, 186, 194-195, 197-198, 201, 222, 227, 246, 253, 257,
264, 275, 281, 283, 295, 319, 328, 335, 339, 341
invisible hand of personal self-interest, 239
Invisible Hand , 3, 28, 119, 128 , 225, 239, 308
invisible, 3, 22, 28, 119, 128-129, 225, 239, 252, 308
invitation to speculation, 70
IOU, 38, 157-159
Iran, 124, 268, 332
Iraq, 24, 95, 177
Ireland, 34, 38, 53, 162, 230, 269, 274, 280, 336
Irish taxpayers, 230
iron hand, 276
iron ore, 79
irony, 16, 279, 309, 337
Isabella and Ferdinand, 208
ISIS, 338
Islam, 55
isolate land rent, 9, 255
isolated from society, 125
“It’s not what you make, it’s what you net” , 129
Italian government’s National Institute of Statistics (ISTAT), 66
Italy, Italian, 66, 180, 210, 269, 286, 299
J
J.P. Morgan Chase, 104
Jackson, Andrew, 265
Japan, 35, 39, 143, 153, 169, 210, 225
Japan’s Mikado, 210
Japanese yen, 39
jargon, 8, 18, 169, 195
Jesus, 69, 89, 132, 142, 270
Jevons, William Stanley, 275
Jewish Marxists, 350
Jewish, 106, 336-337, 350
job creators, 145, 217, 313
job programs, 105
jobless, 93
jobs, 20, 88, 119, 156, 169, 218-219, 287, 345
John Bates Clark Medal, 55
Johnson, Tom, 296
Journal of Economic Studies , 12, 289, 305
Journal of Public Economics , 204
journalists, 14, 45, 157, 245
Jubilee Tube Line, 113
Jubilee Year , 59, 69, 89, 131 , 142, 202, 206, 270, 332
Judah, 131
Judaic Law, 59, 131
Judaism’s Mosaic Law, 69
Judeo-Christian ethic, 206
judgment, 17, 103, 120, 242, 286, 288, 333
Junk Bonds , 3, 132 , 178, 183, 228, 285, 342
Junk Economics , 1, 3, 5-6, 8, 10-12, 14, 16, 18, 20, 22, 24, 26-28, 30, 32,
34, 36, 38, 40, 42, 44, 46, 48, 50, 52, 54, 56, 58, 60, 62, 64, 66, 68, 70, 72,
74, 76, 78, 80, 82, 84, 86, 88, 90, 92, 94-96, 98, 100, 102, 104, 106, 108,
110, 112, 114, 116, 118, 120-122, 124-126, 128, 132 , 134, 136, 138-140,
142, 144, 146, 148, 150, 152, 154, 156, 158, 160, 162, 164, 166, 168, 170,
172, 174-176, 178, 180-182, 184-186, 188, 190, 192, 194, 196, 198, 200-
202, 204, 206, 208, 210, 212, 214, 216, 218, 220, 222, 224, 226, 228, 230,
232, 234, 236, 238, 240, 242-244, 246, 248-250, 252, 254, 256, 258, 260,
262, 264, 266-268, 270-272, 274, 276, 278, 280-282, 284, 286, 288, 290,
292, 294, 296-298, 300, 302, 304, 306, 308, 310, 312, 314, 316, 318, 320-
322, 324, 326, 328, 330, 332, 334, 336, 338, 340, 342, 344, 346, 348, 350,
352, 354
Junk Mortgage , 5, 9, 29, 33, 37, 43-44, 77, 87, 98, 131, 133 , 134, 154,
158, 169, 174, 190, 213, 228, 230, 262
junk-bond, 194, 318
junk-bonding of American industry, 132
Just Price , 134 , 138, 181
justice, 29, 116, 148, 154, 212, 219, 225, 227-228, 262, 269
K
Kahn, Genghis 57
Kahn, Herman, 41, 141, 144, 246
Kaliningrad, 337
Kay, John,151, 162
Keen, Steve, 77
key technology, 255
key utilities, 321
Keynes, John Maynard (1883-1946) , 46, 51, 92, 113, 135 , 143, 146, 185,
198-199, 204, 206-207, 214-215, 224, 231, 308
Keynesians and post-Keynesians, 293
Khaldun, Ibn, 57
Khalizad, Zalmay, 24
kidnappers, 148
Kiev, 341
killing the economy, 288
killing the host, 4, 10, 61, 81, 115, 125, 200, 208, 323, 325, 327, 329, 331,
333-337, 339, 341, 343, 345, 347, 350, 352-353
kind of market that serves its own interests, 223
Kissinger-Pinochet 1973 Chile military coup, 53
Kissinger, Henry, 53, 326, 342
Kleptocrat , 3, 49, 60, 90, 105, 136 , 147, 172, 244, 335, 337, 341
Koch-backed Heritage Foundation, 63
Kolomoisky, 341
Koo, Richard, 39, 314
Krueger, Anne O., 199, 204
Krugman, Paul, 157, 163
Kubler-Ross 5 Stages of Grief model for dealing with loss, 268
Kucinich, Dennis 344
kulaks, 211
Kuznets, Simon, 280
L
labor and materials costs, 284
Labor Capitalism , 17, 43, 53, 92-93, 104, 137 , 141, 143, 153, 160, 174,
177, 202, 215, 223, 260, 342
labor obligation, 139
labor of science, 96
labor service on public works, 139
labor socialism, 294
labor taxes, 336
labor theory of property, 143
Labor Theory of Value , 15, 58, 133, 138 , 143, 145, 149, 241, 326-327
labor time, 64
labor unions, 17, 58, 122, 184, 199, 347
labor, 8, 10, 14-17, 29-36, 42-43, 45, 49, 53-58, 60, 63-65, 67, 71-73, 76,
78, 84, 89, 92-93, 95-100, 102, 104, 107-111, 119, 121-123, 125, 128, 132-
133, 135-141, 143-146, 149-153, 156, 160, 166-167, 174, 176-177, 181-
184, 186-187, 190, 193, 195-196, 198-199, 201-202, 206, 211, 215-216,
218-219, 221-223, 226, 229-231, 237, 239, 241, 243-244, 256, 260, 265,
268, 273-274, 277, 279-280, 282-284, 286-287, 292, 294-295, 299, 301,
307, 311-315, 318-321, 325-329, 331, 336, 342, 344-345, 347, 349, 353
labor’s relation to labor capitalism, 137
labor/capital exploitation, 347
lack of popular understanding, 116
lack of vocabulary, 116
Lady Windermere’s Fan (1893), Oscar Wilde, 87
Laffer Curve , 133, 138 , 181, 194, 196, 218, 231
Laffer, Arthur 138, 218
Lagarde list, 161
Lagarde, Christine, 269, 340
laggard countries, 308
lagging indicators, 84
Laissez Faire , 138 , 352
Lakoff, George, 20, 24, 116
land and its rent, 222
land as a residual, 254
land census, 129, 167
land grants, 244, 269
land is provided by nature, 140
land nationalization debate, 277
land ownership, 56, 65, 98, 100, 128, 139, 144, 270, 335, 354
land reformers, 229
land rent available for taxation, 165
Land Rent contrasted to Monopoly Rent : See Monopoly Rent contrasted
to Land Rent , 161
land rights and means of subsistence, 181
land speculators, 114
land tenure rights, 64, 67, 139-140, 144, 178, 222, 307, 349
land valuation tax, 107, 140
land value assessment, 335
Land Value Tax (LVT, AKA Land Valuation Tax) , 107, 140
Land-Grant Colleges, 31
land-price gains, 27, 114-115, 277, 281
Land , 6, 9, 15-16, 23, 27-32, 34, 41, 45, 49, 53-60, 64-65, 67, 69, 71, 77,
85-86, 88-89, 91, 93, 95-96, 98, 100, 103, 105, 107-108, 112-115, 117, 123,
127-129, 131, 139 , 142-144, 146, 150, 154, 161, 165-167, 173, 176-178,
181-187, 195, 197-201, 204, 206-210, 212, 222-224, 227, 229, 231-232,
244-245, 252, 254-255, 257, 264, 269-270, 273-274, 277-278, 281, 288,
292-294, 296, 301-304, 307, 317, 319-320, 325-329, 331-333, 335-337,
340-341, 347, 349-350, 354
landed aristocracy, 41, 75, 102, 140, 149, 177, 216, 274, 291, 293, 301
Landlord , 13, 15-16, 23, 28, 32, 42, 54-59, 76-77, 85-87, 90-91, 95-96,
102, 107-108, 112, 129, 140 , 142-145, 149, 154, 165-168, 173, 177, 182,
186, 194, 197-199, 201, 207, 209-211, 214, 224, 231, 246, 253, 255, 266,
276, 280-281, 291-292, 295, 299, 301-302, 314, 317, 319, 324-325, 327,
330-331
lapse, 14, 180, 214
large financial institutions, 99
late fees, 70, 269
latifundia , 299
Latin America, 61, 63, 104, 154, 172, 210-211, 268, 309, 331
Latin, 18, 49, 61, 63, 104, 142, 154, 172, 181, 210-211, 219, 238, 247, 268,
309, 331
Latvia, 22, 34, 268, 274, 334-337
Latvia’s debt deflation, 268
Launhardt, Wilhelm, 278
law enforcement, 197
Law of Unintended Consequences , 126, 141
law, 3, 6, 14, 16, 18, 24, 28-29, 40, 50, 54-56, 58-59, 66-67, 69, 76, 79, 84,
90, 95, 97-98, 105, 109, 114, 117, 119, 126, 131, 135, 141, 143, 146-147,
150, 162, 166, 171, 173, 177, 181, 186, 194, 197, 202, 205, 207-213, 215,
217, 219, 221, 224, 226, 228, 231-232, 238, 243, 255-256, 261, 269, 271,
277, 293, 295-296, 299, 307-308, 312, 329, 334, 345-346
Law, John, 97
lawbreaking, 64, 211
laws of economics, 277
laws of thermodynamics, 307
lawyer, 98-99, 109, 208, 251, 256, 271, 294, 339
lawyers have a saying, 271
lax policy, 45
Lay, Ken, 121
LBGTQ, 58
lead-nation exports, 105
leading and lagging indicators, 84
Learned Ignorance , 3, 33, 52, 87, 120-121, 137, 141 , 170, 225, 242, 297
leases, 112
left out of account, 124
left wingers, 333
legacy of feudalism, 5, 59, 63, 167, 202, 291, 293, 303, 304, 319, 327, 333,
347
legal and political context, 90
legal charges, 104
legal chokepoint, 139, 255
legal claims, 96
legal maximum rate, 238
legal monopoly power, 95
legal priority, 99
legal privileges, 49-50, 57, 194
Leguin, Ursula, 21
leisure economy of abundance, 5, 89
lending to families, 263
Lenin, Vladimir, 90, 146-147, 162, 245
Les Femmes Savants (1672), Molière, 141
less competitive in global markets, 181
less polarized distribution of income and wealth, 185
less utility, 238
lesser evil, 344
lesson of history, 270
lever to privatize, 185
leviathans, 201
Leviticus 25, 69, 131, 142, 206
Levy Institute at Bard College, 155
levy taxes, 109, 139, 230
Levy, Robert, 19
Lewis, Michael, 21
liabilities side of the balance sheet, 185, 232, 242, 245, 312
liabilities side of the economy’s balance sheet, 196
liar’s loans, 169
Liberal Democracy , 88-89, 142
Liberal , 42, 88-89, 142 , 167, 170, 198, 210-211, 246
liberate bondservants, 69, 131, 142
Liberia, 171, 222, 230
Libertarian anthropologists, 139
Libertarian mascots, 16
Libertarian socialism, 15
Libertarian , 15-16, 20, 42, 107, 114, 139, 142 , 200-201, 208, 228, 266,
277, 292, 301
Liberty Bell , 131, 142
liberty, 16, 59, 76, 85, 89, 125, 131, 142, 232, 302
Libya, 124
Liechtenstein, 230
light touch, 223
limited competition, 160
Limited Liability Company (LLC), 40, 42, 60, 64 , 67, 80, 160, 162, 218,
222, 243, 260, 285, 316, 343, 345
linear progress, 59
linguistic identity politics, 337
linguistics, 19, 21
Liquidate , 143
liquidation of the public domain, 143
Liquidity Trap , 143 , 214, 248
Liquidity , 7, 52, 79, 143 , 206, 214, 248, 262
Lisbon and Maastricht Treaties, 269
literary criticism, 272
literary prize, 310
Lithuania, 337
Liu, Henry, 53, 67
live extravagantly, 133
live within their means, 126
livelihood, 20, 93, 122
living in the short run, 180
living standards are diverging, 307
living standards, 18, 30, 71, 89, 120, 153, 193, 195, 249, 268, 284, 286,
296, 299, 307-308, 312, 318, 334, 337, 346
LLC (Limited Liability Company), 40, 42, 60, 64 , 67, 80, 160, 162, 218,
222, 243, 260, 285, 316, 343, 345
loan market, 146
loan packagers, 169
loan recipients, 65
loanable funds theory, 163
loans become riskier, 285
loans to obtain a good education, 122
loans to third world countries to finance their trade dependency, 246
loans-for-shares scam (1994-1995), 136
lobbying by politicians for special privileges, 199
Lobbyist , 12, 15, 17, 20-21, 24, 42, 50, 59, 73-75, 77, 93, 96, 103, 120, 143
, 157, 159, 177, 201, 219, 225, 251, 256, 268, 281, 285, 316, 320, 324, 332,
344
lobbyists in academia, 74
lobbyists, pharmaceutical and health insurance sectors, 344
Lobe, Jim, 25
local agricultural extension services, 246
local governments, 115, 190-191
local oligarchs, 92
Locke, John (1632-1704) , 143, 107, 112, 143 , 177
locked into debtor dependency, 284
logical constructs, 278
logically consistent, 170, 271-272, 300
London Agreement (1952), 108
London Tribunal, 152
long arc of industrial capitalism, 89
long lead times, 101
long-run production, 208
long-term analysis, 321
long-term credit management, 170
longer amortization maturities, 101
longer to pay, 340
loom-fodder, 181
loopholes, 28, 83, 104, 128, 162, 225, 251, 269
looters, 14, 211, 218, 223, 229, 280, 336, 342, 352
looting pension funds, 211
lord, 15, 22, 32, 41, 66, 89, 98, 132, 140, 154, 166
lords of the land, 89, 140
losers, 221
loss of sovereignty, 237
loss reserves, 317
losses on cost overruns, 187
losses, 5, 22, 78, 99, 110, 128, 160-161, 173, 175, 185, 187, 230, 253
Lost Tradition of Biblical Debt Cancellations (2018), Michael Hudson, 35,
203, 353-354
low flat tax, 42, 241
low interest rates, 92, 143, 189, 192, 262
low production prices, 230
low reported net savings, 282
low tax-avoidance prices, 229
low yields on CDs, 190
low-interest reserves, 98
low-surplus economies, 111
low-wage countries, 105, 277
low-wage manual labor, 60
lower credit rating, 230
lower down payment, 101, 312
lower income brackets, 122
lower interest rates, 75, 77, 101, 248, 257, 312
lower property taxes, 28, 227, 264
Lucas, Robert, 297-298, 304
lucrative activities, 54
Lukács, George, 350
Luke 4, 69, 89, 132, 143, 270
Luther, Martin, 21, 323
Luxembourg, 172
luxury makes nations trade-dependent, 279
luxury spending, 207
luxury trade, 73, 98, 299
LVT (Land Value Tax), 140
M
Mach, Ernst, 278
macro-analysis, 219
macroeconomic level, 249
Macy’s, 343
madams, 182
made-up fact or story, 232
madness of crowds, 44-45
Madoff, Bernie, 28, 180
mafia, 67
magazines, 74
magic of compound interest, 187, 287
magic of the marketplace, 287
magicians and mimics, 251
magnitude, 141, 201, 209, 232, 291, 301
maids, 182
mainstream media, 11, 165
mainstream models, 77, 280
mainstream orthodoxy, 129, 274, 291
mainstream textbooks, 239, 320
mainstream trickle-down optimism, 238
maintenance and repairs, 75, 173
major campaign contributors, 261, 344
major category of capital formation, 258
major cleanup costs, 286
major international oil and mining corporations, 80
major political campaign contributor, 243
major revenue flows, 197
major sponsor of junk economics, 243
major troop commitment, 338
make and enforce laws, 109
make good, 115
make savers whole, 185
Makers and Takers , 22, 145 , 287
making loans at a markup, 263
making society better, 302
making the world better, 300
maldevelopment, 237
maldistribution, 296
malstructured, 13, 224, 237, 300
Malthus opposed Ricardo on value and rent theory, 308
Malthus, Thomas Robert (1766-1834) , 31, 54, 58, 77, 85, 145 , 186, 231,
308-309
management fees, 44, 177, 229, 317
managerial bureaucracy, 90
Manifest Destiny, 31
manipulate markets, 262
Manning, J. G., 67
manorial estates, 166
manors under local warlords, 207
Manual of Political Economy (1853), E. Peshine Smith, 210
many regular working people get swindled, 342
margin of cultivation, 76, 197
marginal changes, 91, 292, 300
Marginal Utility Theory , 146 , 149, 239
Marginalism , 3, 125, 133, 146 , 149, 151, 153, 155, 157, 159, 161, 163,
279, 300
Mark-to-Model Accounting , 148
Market Bolshevism , 147 , 228
Market Economy , 142, 147 , 155, 179, 227, 273, 293
market exchange, 41, 73, 86, 214
market failure, 224
market for U.S. exports, 246
Market Fundamentalism , 54, 148
Market Price , 9, 39, 65, 75, 78, 85, 101, 139-140, 148 , 159, 181-182, 195,
204, 207, 209, 241, 280, 295, 301, 315, 317
market pricing of assets, 170
Market Socialism , 148
Market : See “The Market” , 223
marketing and distribution affiliates, 230
marketplace, 287, 310, 347, 349
markets are embedded in institutions and tax policies, monetary policy and
public regulations, 292
Marlboro Man, 287
Marshall, Alfred, 9, 78, 86, 200, 275, 308
Marx, Karl (1818-1883) , 8, 12, 32, 51, 58, 75, 90, 96, 98, 113, 126, 133-
134, 146, 148 -151, 154, 162, 182, 211, 219, 234, 276, 279, 293, 299, 303,
308-309, 319, 326, 333, 346-347
Marxism , 150-151 , 211, 276, 279, 303, 306
Marxist socialism, 16
mass poverty, 56, 270
Massachusetts, 153
massive bank fraud, 230
material output per worker, 182
mathematical illiteracy, 20
mathematical notation and graphs, 278
mathematical symbols, 151
mathematically indeterminate solutions, 124
mathematically optimum position, 282
mathematics of compound interest, 63, 286, 318
mathematics of rent theory, 200
mathematized economic theory, 11
mathematized tunnel vision, 201, 277
Mathiness , 95, 151 , 232
matter of fact and existence, 286
maximize costs, 153
maximize efficiency, 149
maximize growth and prosperity, 196
maximizing prices, 202
McCarthy, Terence, 162, 219
meals, 214
means of production, 49, 57, 71, 122, 128, 149-151, 153, 159, 183, 196,
224, 231, 242, 245, 282, 318
means of torture, 169
means to pay, 72, 216-217, 273, 277
measure of output, 182
measure of value, 215
measures of GDP, 95
meat packers, 244
media, media vocabulary, 11, 14, 22, 63, 74, 165, 172, 228, 234, 237, 267,
271, 304, 320
media’s preferred adjective, 237
medical treatment, 280
Medicare surtax, 98
Medicare, 78, 98, 145, 314-315
medieval castles, 167
medieval churchmen, 127
medieval conquerors, 53
medieval law, 40
medieval, 30, 40, 53, 57, 60, 89, 127, 141, 150, 161, 166-167, 208, 216,
222, 238, 270, 272, 286, 301
medium of exchange, 215
Meier, Gerald, 275, 289
Melman, Seymour, 153, 177
memory hole, 12, 226
Menger, Carl (1840-1921) , 35, 41, 151 , 162, 215, 226, 275, 330
mercantile trade debts, 35
mercantilist, 105, 293, 308
mercenaries, 111, 159, 341
merchants of knowledge, 251
mergers and acquisitions, 132, 160, 190, 260
Merkel, Angele, 339
Merton, Robert C., 170
Mesopotamian Clean Slates, 238
Mesopotamian temples and palaces, 27, 35, 155
metal bullion, 41
metallic currency, 202
methodology, 4, 11, 52, 55, 84, 191, 249, 272, 279, 291, 293, 295, 297, 299-
303, 305
Metropolitan Museum, New York City, 349
Mexican Telecom monopoly, 197
Mexico, 61, 104, 154, 328, 350, 352
michael-hudson.com , 10, 347, 349, 354
Michaelson, John C., 192
microeconomic level, 61
microeconomics, 170, 272, 289
Microsoft, 197
Middle Class , 5-6, 20, 43, 56, 64, 74, 92-93, 102, 104, 122, 138, 152 , 184,
196-197, 211, 223-224, 226, 320, 346
middle income brackets, 152
middle-class savers, 177
Milanovic, Branko, 234, 298, 304
military conquest, 123, 166, 185, 304, 327
military force, 153, 166
military free-market terrorism, 138
military hawks, 193
Military Junta , 153 , 223
military outflows of dollars, 351
military overhead, 123
Military Spending , 38, 53, 77, 79, 99, 109, 116, 153 , 159, 172, 174, 296
military-industrial complex, 55, 244
Milken, Michael, 116, 132
mill owners, 182
Mill, John Stuart (1806-1873) , 9, 12-13, 15, 24, 58, 87, 116, 149, 153 ,
177, 198, 200, 209, 211, 224, 246, 273, 277, 289, 291, 293, 296, 301, 325,
333
Miller, Dick, 29
mindset, 119, 123, 345
mineral rights, 34, 49, 60, 139, 255, 288, 303, 329
minimize prices, 295
minimize taxes, 83, 193
minimize the cost of living and doing business, 202, 346
minimum wage has fallen steadily in purchasing power, 169
minimum wages, 152
Minsky model, 77, 155
Minsky, Hyman (1919-1996) , 39, 77, 102, 104, 136, 154 , 160, 175, 180,
243
miserable employment conditions, 303
misrepresentation, 151
Mississippi Company, 44
mistake form for substance, 275
mixed economy with checks and balances, 304
Mixed Economy , 52, 56, 86, 147, 155 , 176, 225, 294, 303-304
mixed public/private economy, 147, 224
MMT (Modern Monetary Theory), 9-10, 103, 136, 154-157, 163
moats and parapets, 167
mock-science, 272-273
mode of warfare, 167, 283, 331
modern Germany, 135
modern mathematical economics, 278
Modern Monetary Theory (MMT) , 9-10, 39-40, 53, 98, 103, 126, 136, 155
, 157, 163, 173, 222
modern, 9-10, 21, 39-41, 46, 51, 53, 59, 61, 69, 84, 86-87, 98, 103, 123,
126, 135-136, 139, 154-155, 157-158, 163, 167, 173, 180, 187, 196-197,
199, 214, 216, 222-223, 225-226, 253, 270, 276, 278, 286, 324, 331, 343
modernization of backward colonies, 211
Modernization , 155 , 211, 334
Molière, 141
Monaco, 172, 230
Monetarism , 56, 73, 108, 132-133, 157 , 201, 276, 300, 332-333
monetarist abuses, 275
monetarist fallacy, 121
monetarist worldview, 276
monetary medicine, 35
monetary straitjacket, 109
monetary support, 29
monetize budget deficits, 10, 156
monetize, 10, 52, 64, 156, 207, 216, 299
money and banking as a public utility, 178
money and credit as a public utility, 10
money as a commodity, 226
money creation, 33, 55, 97, 111, 122, 124, 126, 152, 156-157, 185, 191,
226, 233, 255, 261, 330
money economy, 66, 214
Money Illusion , 159
money is a legal creation, not a commodity, 156
money lords (financiers), 154
Money Manager Capitalism , 3, 100, 138, 145, 160 , 163
Money Manager , 7-8, 99, 123, 160 , 190, 244, 256, 334, 342
money of the world, 86
money wages deflated by the consumer price index (CPI), 313
money-capital, 283
money-changing, 30
money-creating privilege, 158
money-holders, 156
money-laundering center, 335, 337
money-management fees, 229
Money , 3, 5-10, 19, 27, 30, 32-33, 35-36, 39-41, 51-53, 55, 57-58, 66-67,
69-70, 73, 80, 85-86, 92, 94, 97-104, 106, 108-111, 116, 122-124, 126, 133,
135-136, 138, 145, 147-149, 158 , 166, 170, 172-173, 178, 180, 182, 185,
187-191, 195, 198, 203, 206-207, 209-210, 212, 214-216, 219, 221-222,
224-226, 229-230, 233, 238, 244, 251, 255-256, 261-263, 265, 273, 283-
285, 287, 296-297, 299, 304, 308, 311, 313, 318, 320-321, 324, 330, 332-
335, 337, 341-343, 350-351
money’s early role, 159
money’s evolution, 163
monopoly character of land rent, 198
monopoly pricing, 177, 239
Monopoly Rent Contrasted to Land Rent , 140, 161
Monopoly , 5-6, 8-10, 16, 18-19, 23, 28-29, 32, 34, 44, 50, 55, 57-60, 66,
76, 85-87, 90, 93, 95, 100-101, 103, 105, 107, 109, 120, 123, 127-129, 140,
142, 146-148, 156-157, 160 -161, 165, 167-169, 176-177, 181-184, 186-
187, 194, 196-201, 204, 208-211, 215, 218, 222, 225-226, 229, 232-233,
237, 239, 252, 255-256, 258, 276, 292-295, 297-298, 302-303, 318-321,
324, 326-329
Monsanto, 341
monthly “nut”, 54, 83, 129
Moral Hazard , 161 , 167, 185, 231
moral perspective, 119
moral philosophy, 58, 278, 295
moral principles, 304
morality, 135, 155, 212, 231
morally justified, 59, 133, 184, 256
more flexible credit, 97
Morgenson, Gretchen, 47
mortgage bubbles, 158
mortgage debt, 33, 73, 103, 138, 140-141, 148, 166, 168, 191, 232, 311,
350
mortgage interest at 6%, 198
mortgage lending, 29, 33, 57, 97, 102, 206, 230, 262, 301
mortgage rates, 263
Moslem law, 162
Mosler, Warren, 126
mother countries, 124
motive force of economic behavior, 306
MSNBC, 30
multilayered political as well as economic system, 302
multinational companies, 229
Mundell, Robert, 170
municipal affairs, 114
Muqaddimah (1377), Ibn Khaldun, 57
Murabaha Loan , 162 , 238
mutual aid, 57-58, 111, 150, 212, 231
mutual fund, 44, 152, 160, 205, 229, 260, 342
mutual gain, 133, 238
My kingdom for a horse, 148
Myrdal, Gunnar, 276, 289
mythology of financialization, 268
myths, 4, 11, 23, 140, 251, 253, 255, 257-261, 263, 265, 267, 269
N
Naked Capitalism , 10, 129, 349
naming a product, 14
Napoleonic Wars, 109, 116, 157
narrow view demonization, 224
national bank, 30-31, 210, 305
National Bureau of Economic Research, 46, 84
national debt, 209, 215, 244
national income accounts, 165, 177, 221, 318
National Income and Product Accounts (NIPA) , 15, 27, 50, 84, 165, 182,
184, 194, 206, 252, 315, 317, 324
national income concepts, 282
national income statement, 86
national prosperity, 257, 287
national public treasuries, 230
national real estate bubble, 134
national security umbrella, 153
national statistics, 6, 282
national war debts, 59
nationalist, 57, 229, 336, 341
nationalistic state, 25
nationalization, 15, 108, 208, 210, 277, 292, 301, 319
nationalized banking systems, 16
nations, 28, 38, 57, 63, 72, 76, 96, 105, 109, 111, 127-128, 143, 169, 197,
237, 256, 275-276, 279, 283, 288-289, 296, 303, 307-309, 320, 337, 353
NATO, 55-56, 166, 337-338, 341
natural law, 6, 29, 55, 119, 224, 329
natural liberty, 76
natural lobbying position for commercial bankers, 157
natural monopolies, 16, 34, 60, 105, 147, 161, 165, 181, 186-187, 200-201,
208, 210, 256, 276, 292, 319-320, 328
Natural Monopolies, See Monopoly , 160; Public Domain , 186; and
Commons , 60
natural order, 89
natural resource patrimony, 181
natural resources, 5, 16, 23, 29, 58, 79-80, 88, 98, 110, 115, 123, 128, 136,
165-167, 172, 181, 183, 186, 195, 197, 201, 208, 221, 229, 243, 256, 292,
294, 296, 304, 317, 321, 331-332, 340
natural sciences, 18, 272, 307, 309
natural selection, 119
natural tax base, 264
natural tendency, 45, 307
naval ports, 186
Nazi, Nazism, 23, 70, 108, 202, 336, 338, 341
NBC, 173
Near East, 35, 67, 94, 134, 144, 163, 234, 330, 337-339, 353-354
Near Eastern innovations, 56
necessary costs of production, 9, 85, 241, 333
needless monetarist austerity, 157
negation of a negation, 206
negative connotations, 238
negative equity, 39, 78, 98, 207, 232, 242, 315
negative feedback (diminishing returns), 219
negative-sum activities, 249
negligible returns on savings, 190
neighborhoods, 112, 114, 153, 264, 344
neighboring parks, 198
Nemesis, the goddess of justice, 116
neo-feudalism, 105
neo-Nazi, 336, 338
neo- rentier economy, 150
Neo-Serfdom , 121, 168 , 173, 202, 330
Neoclassical Economics , 73, 132-133, 165 , 175, 219, 242, 271
neoclassical mainstream, 114
neoclassical theory, 307
neocolonialism, 274
Neocon (AKA Neoconservative) , 166
neoconservative (neocon) imperialists, 23
neoconservative, 23, 55, 166, 177
Neofeudal economy , 96, 166
Neofeudalism , 3, 90, 100, 142, 155, 165, 167 , 169, 180-181, 215, 304
neoliberal consensus, 166
Neoliberal Disease , 80, 167
neoliberal illusion, 268
neoliberal junk economics, 10-11
neoliberal or monetarist editorial boards, 300
neoliberal orthodoxy, 284
neoliberal regimes, 155
Neoliberalism , 18, 57, 80, 87-88, 94, 110, 113, 125-126, 155, 163, 167 ,
215, 219, 268, 325-326, 333-334, 338
Neolithic Age, 64
net after-expense income, 78
net product, 65, 216, 221
net retained earnings, 317
net saving, 185, 282
net tax revenue, 100
Net Wages , 168
net worth, 34, 39-40, 73, 158, 169, 191, 207, 230, 242, 245, 299, 315
net-worth money, 39
new bank lending, 189, 281
new borrowing, 64, 116
new Cold War, 24, 338
new credit, 40, 102, 133, 187, 243, 287
new Dark Age of debt serfdom, 270
New Deal Democrats, 293
New Deal, 6, 67, 224, 293, 335
new economic thought, 303
new Iron Curtain, 338
New Jersey’s economy and employment, 193
new lending, 54, 70, 185
new moral measure celebrating evil, 251
new objective knowledge, 309
new owners build in interest, dividends and management salaries, stock
options and bonuses to the prices they charge, 316
new paradigm, 268
new plant and equipment, 168
New School for Social Research, 305
new takeoff or recovery, 214
New York and London Stock Exchanges, 147
New York Federal Reserve, 43
New York Times , 47, 95, 106, 134, 157, 174, 306
New York University, 152
Newspeak , 11, 79, 92, 155, 168 , 193
Nicholson, John Shield, 274, 289
Nineteen Eighty-Four [1984] (1949), George Orwell, 21, 79, 172, 234
Nineteenth (19 th )-century industrial takeoffs, 225
Ninety-Nine Percent (as in “We are the 99 Percent”) , 5, 7, 24, 44, 57, 63,
69, 73, 89, 96-97, 108, 110, 113, 119-120, 133, 156, 160-161, 166, 169 ,
171-173, 178-179, 185, 206, 215, 217, 219, 221-222, 225-226, 231, 238,
245, 261, 263, 268, 281-283, 287, 298-299, 311, 313-314, 320, 324, 326,
345
NINJA Loans , 37, 44, 110, 134, 169 , 230
NIPA (National Income and Product Accounts), 15, 27, 50, 78, 84, 88, 103,
165, 182, 184, 194, 199, 201, 206, 221, 252-255, 257, 281, 314-315, 317,
324
Nixon, Richard M., 310
no income tax, 172-173, 198, 222
No More Argentinas rule, 339-340
no poor man ever gave anyone a job, 217
Nobel Economics Prize , 17, 23, 52, 66, 106, 151, 169 , 175, 191, 225, 272,
297, 305
Nobel Prize, 4, 11-12, 141, 169-170, 200, 229, 242, 305-307, 309, 333
Nobel, Alfred, 305
noble lie, 23-24
nobody could have foreseen, 74, 141, 238
nominal after-tax wages, 129
nominal interest, 162
nominal owners of their homes, 166
nominal political independence, 124
nominal profits, 97
nominal return, 152
nominal wages, 195
nominally left-wing parties, 345
nominally socialist parties, 211
Nomura Holdings, 39
non-academician, 310
non-discretionary obligations, 77
non-free market economists, 170
non-governmental court, 109
non-labor income, 98
non-mathematicians, 191
non-payment, 133, 213
non-producing rentier income, 241
non-profit sector, 182
non-prosecution of financial crime, 312
non-public pension, 78
non-spending, 135, 206
non-taxpayers, 162
non-threatening, 297
Nord Stream Pipeline, 338
Norman Conquest of England (1066), 112, 140, 167, 301, 327
Norquist, Grover, 201
North Korea, 268
North, Douglass C., 170, 229
Northern politician, 30
Norway, 309
not in their best interests, 116
notorious private mercantile cheating, 216
nuances of words, 168
nurses, 190-191
nut, 54, 83, 102, 129, 168, 314
O
O’Connor, Sarah, 163
Obama Administration Justice Department, 227
Obama Administration, 72, 189, 193, 227, 233, 269, 334
Obama Cabinet, 162
Obama, Barack, 73, 261
Obamacare, 5, 186, 215, 345
objective reality, 252, 321
objective statistics, 252
objective, 3, 8, 44, 50, 52, 60, 107, 125, 147, 160-161, 165, 196, 252, 257,
274, 277, 282, 305, 309, 321, 325, 327, 331, 334
obliged to emigrate, 248
oblivion, 254
obsolescence, obsolete, 50, 65, 75, 97, 173, 307
obsolete systems of land tenure, 307
“Obstruct, obstruct, obstruct”, 63
Occupy the SEC, 171
Occupy Wall Street protests, 169
Occupy Wall Street , 169, 171
off the balance sheet, 91
off the top, 54, 78, 168, 194, 314
offending their employers, 217
official gold stocks, 109
officials, 60, 70, 92, 125, 136, 172, 182, 262, 329, 340, 351
offloading, 152
Offshore Banking Center , 171
offshore banking centers, 59, 83, 92, 181, 222, 229, 234
offshoring employment, 105
Ohlin, Bertil,135, 170, 308
oil and gas fields, 201
oil and mining, 8, 32, 80, 255
oil and natural resource lords, 66
oil Gulf States, 80
oil resources, 193, 244
oil-producing country, 172
oil-tanker affiliate, 172
Old Babylonian Period (c. 2000 BC), 61
oligarchies against democracies, 157
oligarchizing the risk, 161
“Oligarchy is the stage into which democracy devolves” in Politics V (c.
330 BC), Aristotle (paraphrased), 172
Oligarchy , 3, 38, 43, 49, 53, 56-57, 59-60, 63, 74, 80, 88, 96, 109-110,
113, 115, 121, 123-124, 142, 145, 148, 153, 155, 157, 160-162, 166-168,
172 , 179, 181, 184, 193, 196, 200-203, 207, 211-215, 225, 228, 230-231,
237, 239, 251, 266, 269, 280, 291, 293, 296, 299, 302, 326
“On the definition of political economy; and on the method of investigation
proper to it” in Essays on Some Unsettled Questions of Political Economy ,
Ch.5 (1844), John Stuart Mill, 273, 289
one party’s debt is another’s saving or credit, 69
one party’s gain is another’s loss, 92,199, 249
One Percent, The , 172 , 245
one-issue voters, 73
ongoing stream of interest payments and penalties, 269
only following orders, 121
operating and maintenance costs, 197
Operation Condor, 268
opponents of reform, 292-293
opportunities, 5, 9, 42, 96, 99, 105, 186, 258-259, 312, 321, 328, 335
opportunity to rise in status, 153
oppress the public, 143
oppressive employers, 145
optimistic 8%, 138
optimizing production, 87
Optimum , 89, 173 , 189, 282
origin of money, 86, 151, 162
Orwell, George, 13, 79, 172, 215
Orwellian doublethink, 11, 13, 342
Orwellian rhetoric, 344
other debts, 85, 203, 314
other peoples’ debts, 185
“Other Peoples’ Money” , 173
out of account, 52, 124, 142, 200, 216, 256, 297
out-of-pocket costs, 85, 143
outflow, 38, 351
output, 15-16, 27, 34, 54-55, 94, 96-98, 103, 108, 120, 146, 165, 182, 194,
216, 219, 230, 249, 254, 256, 266, 277, 281, 284, 286, 291, 295, 312, 318,
330
Over-Depreciation , 28, 75, 165, 173 , 253
over-indebtedness, 203
over-saving, 143
over-simplified assumption underlying correlation analysis of trends, 90
overall consequences, 212
overall cost structure, 100, 186
overall ebitda, 253
overall economy, 9, 52, 115, 148, 176, 196, 212, 288
overall magnitude, 291
overall system, 179, 273
overcapacity, 97
overgraze and mismanage, 229
Overhead , 5, 19, 27, 45-46, 52, 54, 58, 61, 63, 70-71, 77, 88, 90, 94, 100-
101, 103-104, 106, 108, 120, 123-125, 128, 133, 135-136, 138, 142-143,
159, 165, 167, 174 , 182-183, 195, 200, 214, 216, 218, 226, 229, 232, 242-
243, 254, 256, 258, 273, 280, 282, 285-286, 292, 294-295, 298, 300, 303,
312, 318-319, 325, 330
overly optimistic, 347
overpopulation, 31
overuse and depletion, 229
ownership free and clear of debt, 174
ownership of assets, 97, 281
Ownership Society , 160, 171, 174 , 197
oxymoron, 19, 21, 215, 271
ozone, 46
P
pace of cash withdrawals, 187
paid according to their productivity, 182
pain and sacrifice, 282
palaces, 27, 35, 64, 86, 147, 155, 158, 214-216, 330
palliative, 89, 269
Panama, 171, 222, 230
Panic , 47, 97, 175
papacy, 30, 127
paper gold, 109
paper money, 39, 109, 157-158
paper or electronic money, 158
Paraguay, 308
Parallel Universe , 33, 35, 132, 169, 175 , 231, 242, 273, 300, 302
paramilitary organization, 341
Parasite , 10, 29, 32, 115, 175 , 219, 323-325, 347, 352
parasitic economic tendencies, 304
parasitism, 20, 71, 105, 129, 132-133, 217, 219, 323-324
parent company’s branch, 172
Paris Bourse, 16, 197
Paris Commune, 150
Paris, 16, 150, 197, 205, 263
parks, 113-114, 198, 264
Parliamentary Labor Party, 150
parliamentary political and lawmaking power, 89
parliamentary reform, 42, 63, 293, 319
Partial Equilibrium Analysis , 176
partnership, 51, 67, 109, 181, 187, 223, 238
PASOK, 211
passive-aggressive denial, 268
passivity, 94, 270
patent-protected products, 161
patented drugs, 148
patents, patent rights, 128, 161, 255, 256, 294, 302
patient” individuals, 122
Patten, Simon R. (1852-1922) , 9, 12, 31, 55-56, 67, 96, 124, 126, 176 ,
185-187, 200, 276
Paul Craig Roberts’ bio of Michael Hudson, 350
Paul Samuelson’s economics, 306
paulcraigroberts.org , 352
Paulson, John, 9
pauper-labor countries, 31
pay down debts, 135, 281
pay to play, 179
pay-as-you-go, 80, 104, 209, 261
payback time, 40, 179
payday loans, 37, 122, 138, 314
paying back all debts is not necessarily justice, 212
paying better wages, 177
paying down the public debt, 10
paying for vacation time, 152
paying interest and carrying charges, 311
paying tribute, 255
payment for taxes, 108, 158
Peabody Museum, 144, 352
Pearson, 234, 345
peasants, 181
Pecora hearings, 40
peer pressure sanctions, 111
Peking University, 349
penalties, 64, 70, 104, 110, 229, 269, 276
Pennsylvania industrialists, 30
pension benefit guarantee corporation (PBGC), 260
pension contributors, 160
Pension Fund Capitalism , 7, 44, 51, 137-138, 160, 176 , 260, 319, 342
pension fund reserves, 317
pension fund socialism, 342
pension funds, 7, 87, 99, 148, 160, 177, 189-191, 211, 219, 232, 245, 260,
280, 315, 332, 342-343
pension obligations, 40, 312
pension plan deficits, 190
pension set-asides, 83
pensioners, 177, 185, 260, 342
pensions and 401(k) retirement accounts, 138
pensions, 19, 44, 64, 88, 92, 104, 121-122, 138, 150, 160, 168, 191, 193,
211, 229, 265, 287, 312, 314, 316, 320-321, 342
Pentagon Capitalism (1970), Semour Melman, 153
Pentagon Capitalism , 51, 142, 153, 168, 177 , 187, 244
peonage, 3, 18, 20, 56, 64, 69, 71, 74, 79, 89, 93, 100, 102, 113, 117, 121,
142, 153, 166, 168, 173-174, 197, 202, 258, 269-270, 276, 302, 304
per work-year, 182
Pereire brothers, 205
periodic financial clean slates, 184
periodic table of the elements, 307
permanent depression, 300
permanent emergency rule, 211
perpetrators, 141
persistent error, 133
personal debts, 35, 69, 71, 85, 89, 131, 331
personal employment, 182
personal freedom, 40
personal liability, 64
personal loans are deemed unproductive, 183
persuasive propaganda, 126
pessimism, 76
pet politicians, 114
Peter’s pence to the papacy, 127
pharaohs, 187, 203
Pharisee circumvention of the Jubilee Year, 132
pharmaceutical, 32, 103, 148, 161, 215, 255-256, 344
Philip the Fair, 216, 286
philosophers, 29, 296
Philosophical Dictionary (1764), Voltaire, 16
phlogiston theory of combustion, 272
physical productivity, 182, 301
physics, 113, 309
Physiocrats , 16, 28, 58, 138-139, 165, 177 , 208, 216, 280, 301
piecework, 152
Piketty, Thomas, 172, 296, 302
Pilger, John, 331
Pinkerton, 150
Pinochet junta, 177
Pinochet, Augusto, 17, 53, 60, 123, 137, 153, 177, 223, 226, 229, 260, 268,
277, 280, 325, 342
pipeline routes, 193
pirate, 66
pitchforks, 74, 344
plaintiffs, 167
planet earth, 273
Planned Economy , 76, 87, 178 , 196, 211
plant, 50, 168, 173, 183
plantation export monocultures, 246
Plato, 29
Pliny, 299
Ploutos (god of wealth), 245
point of view amounts to a theory, 276
Poison Pill , 132, 178
Poland, 29
Polanyi, Karl, 214
Polarization , 19-20, 72, 74, 80, 89, 93-94, 96, 103, 108, 110, 142, 155,
166, 169, 178 , 186, 222, 224, 227, 231, 249, 267, 279, 293, 298, 300, 302,
305, 352
polarize societies, 94
police raid, 171
policy conclusion, 51, 120, 274, 276, 291, 330
policy environment, 273-274
policy holders, 189
policy implications, 52, 58
policy motive, 276
policy of cutting taxes for the wealthy, 194
policy solution, 52
policy structure, 146, 239, 284
policy to save the economy, 288
policy-making is put up for sale, 179
political and economic justice, 148
political and lawmaking power, 89
Political Arithmetic, 86, 280
political change, 217
political counterparts to client academics, 143
political decision, 92, 214
political economy was the queen of the social sciences in the 19th century,
279
political fight, 63
political influence, 256, 309
political insider, 44, 66, 99, 244, 335
political message, 246, 294
political motives, 291
political pressure, 146
political reform, 9, 59, 86, 89, 150, 224, 279
political regeneration, 13
political science, 170, 289, 309
political spectrum, 8, 98, 108, 210, 293
political support, 301
political vacuum, 151, 202
politically acceptable, 70
politically incorrect, 238
politically possible to avoid, 238
politicians, 19-20, 42, 44, 50, 73, 88, 92, 98, 114-115, 126, 177, 179, 184,
199, 208, 228, 243, 251, 261, 268-269, 271, 294, 298, 312, 320, 324-325
Politics , 13, 36, 57-58, 73, 75, 114, 138, 166, 179 , 211, 289, 291, 302,
337-338
Pollution , 46, 71, 90, 93, 105, 110, 156, 179 , 218, 286
pollution: See also Debt Pollution , 71
Ponzi phase, 102
Ponzi Scheme , 3, 28, 39, 44, 47, 98, 100, 110, 148, 175, 177, 180 , 183,
185, 187, 243
popular capitalism, 17
popular media, 22, 74, 267, 271
popular morality, 155
popular opinion, 14, 95
popular opposition, 120, 138
population ages, 160, 209
population growth, 86, 98, 114, 246
population theory, 85, 146
population, 16, 34, 41-43, 56, 60, 65, 74, 76-77, 79-80, 85-86, 88, 98, 102-
103, 108, 111, 114, 117, 121-123, 126, 131, 136, 145-147, 158-160, 166-
167, 169, 172-174, 181, 191, 201, 206-207, 209, 214, 217, 226, 246, 251,
260, 268, 270, 297-299, 304, 335-336, 340, 343
Populism/Populist , 180
populist face, 342
populist ideology, 222
Poroshenko, Petro, 277
Portugal, 269
positive feedback, 91, 219, 294
post office, 42, 258, 328
post-2008 collapse, 232
post-bubble economy, 179
post-classical economics, 46, 141, 149, 166, 252
post-classical era conflates value with price, 241
post-classical model, 281
post-classical neoliberalism, 87
post-Enron prosecutions, 99
post-fact, 232
post-Keynesian schools, 309
post-Keynesians, 136, 293
post-Roman Dark Age, 66, 299
post-Roman law, 18
post-Soviet Baltics, 338
post-Soviet countries, 334, 337
post-Soviet privatization, 90
post-Soviet Russia, 226
post-Soviet, 22, 60, 88, 90, 104, 110, 167, 226, 280, 328, 334, 337-338
post-Stalinism, 336
postcolonial Africa, 331
postfaktisch (German Word of the Year, 2016), 232
posthumous theories of surplus value, 150
Postindustrial Economy , 71, 180
Postmodern Economy , 109, 180
postwar deflation, 244
postwar price deflations, 157
potato famine (Ireland), 91
potential buyers, 227
poverty, 31, 52, 56, 77, 89, 107, 112, 121, 145-146, 227, 268, 270, 287,
299, 304, 307
power of inherited wealth, employers and creditors, 226
power relationship, 93, 98, 148, 292, 299
power, 14-16, 21, 24, 30-32, 41, 53, 58, 60, 63-64, 66, 76, 86, 88-89, 93,
95, 97-99, 103, 105, 109, 115, 123-125, 129, 135, 142, 147-149, 151, 157,
160, 162, 166, 168-169, 172-174, 181, 186-187, 191, 195-196, 199-202,
210-211, 214, 219, 223-224, 226-228, 231, 246, 258, 267, 269, 275, 278,
285, 292-293, 299, 302, 308, 311, 315, 318, 320, 326, 329, 331, 334, 342,
344-345, 351-353
powerlessness, 119
Pozner, Vladimir, 162
pre-capitalist aristocratic social structures, 307
pre-funded, 260
pre-nuptial contracts, 245
pre-selected conclusion, 291
precondition for production, 96
predatory, 6, 12, 14-15, 18, 20, 29, 37, 59, 76, 87, 90, 95, 119-120, 122,
133, 138, 155, 167, 169, 182, 199-200, 223, 225, 249, 254, 256, 258, 266,
279, 289, 292, 296, 299-300, 302-304, 319, 324-325, 333, 352
predatory banking, 59
predatory conquest, 304
predatory corporate practice, 120
predatory finance, 6, 90, 279, 303, 325
predatory lending practices, 37
predatory zero-sum activities, 95, 254
preserve economic order, 59
presidential election, 145
prestigious neighborhoods, 264
pretended beneficiaries, 245
pretense, 5, 95, 119, 136, 168, 173, 218, 229, 231, 248, 253, 263
prevaricate, 181
Price : See Just Price , 134; Market Price , 148; and Value , 241
price, 3-4, 6-9, 11-12, 14-16, 19, 27-28, 31, 33-34, 39-40, 43-46, 50, 54, 58,
63-65, 70-71, 73, 75-81, 83-87, 92-93, 97-112, 114-116, 120, 122, 125,
127, 129, 133-135, 137-140, 143, 146-149, 154-160, 162, 168-170, 172-
178, 180-184, 186-191, 194-197, 199, 201-202, 204-205, 207-210, 213-
214, 216-217, 219, 222-223, 225-230, 232-235, 237, 241, 243-247, 252-
254, 256-258, 260, 262-266, 268, 274, 277-278, 280-282, 284, 287-289,
292, 294-295, 297-303, 305, 307-308, 311-320, 325-328, 333, 335-336,
338, 342-344, 346, 350-352
price adjustment, 169, 195
price gains, 27, 50, 75, 83, 101, 106, 110, 114-115, 160, 177-178, 180, 183,
187, 195, 199, 209, 219, 228, 232-233, 257, 277, 280-282, 316, 319, 343
price gouging, 292, 298, 327-328
price inflation, 3-4, 11-12, 14, 27, 33-34, 40, 45, 50, 70, 73, 79-81, 92, 98,
102-103, 106, 110-111, 115, 125, 138, 146, 156, 158, 160, 174, 176, 183,
187-188, 194, 222, 232, 235, 237, 243-246, 252, 263, 268, 277, 281, 287,
311-313, 319
price of education is inflated on credit, 217
Price, Richard, 85
price to be paid, 122, 266
priced out of the market, 97
prices for basic infrastructure, 148
prices marked up to eliminate profits, 351
pricing Britain and America out of global markets, 266
priesthood, 203, 289
principal, 45, 61, 154, 203-204, 339
Principles of Political Economy (1820), Thomas Malthus, 145
Principles of Political Economy (1848), John Stuart Mill, 154
printing domestic money, 116
Pritzker family, 344
private law, 181, 255
private sector, 10, 35, 39, 86, 88, 147, 155-156, 194, 200, 216, 232-233,
254, 258, 327, 331
private-sector fraud, 35
private, 5, 10, 23, 28, 35, 39, 42, 44, 51, 57, 67, 86, 88, 105, 107, 115, 126,
142, 147, 155-157, 159, 168, 176, 181, 186-187, 194, 200-202, 208, 210,
216, 219, 222-224, 229, 232-234, 254-255, 258, 265, 295, 303-304, 324,
327, 330-331, 335, 340-341
privatization de-socializes public infrastructure, 181
privatization giveaways, 129
privatization selloffs, 70, 121, 141, 265
Privatization , 8, 17, 32, 34, 39, 42-43, 53, 67, 70, 72, 87-88, 90, 100, 103,
110, 112, 121, 129, 136-137, 139, 141-143, 148, 160-161, 166, 169-170,
176, 181 , 184-186, 209, 211, 228-230, 246, 258-259, 265, 268-269, 276-
277, 283, 286, 293, 300, 312, 318, 321, 328, 333, 339, 354
privatize social security, 7, 44, 209, 343
“Privatize, privatize, privatize!” 63
privatized natural resources, 58
privatized railroads and water, 5
privatizing public enterprises, 160
privatizing public housing, 223
Privilege , 5, 15, 22-23, 28, 49-50, 57, 59, 74, 89-90, 95-96, 98, 121-123,
126-127, 139, 155, 157-158, 161, 181 , 184-185, 194, 196, 199-201, 211,
225, 229, 255-256, 291, 293-295, 303, 323, 325-328, 330
privileged trading companies, 197
prize-winning experts, 271
pro-American regime, 74
pro-creditor bankruptcy laws, 243
pro-financial policies, 226
pro-rentier policy, 77
proactive government policy, 224
probability, 51, 319
problem, 18, 24, 30, 33, 38-39, 44, 52, 56, 63, 74, 90-91, 93, 97, 102, 116,
122, 124, 134, 141, 143, 146, 157-158, 175, 189-190, 196, 209-210, 217,
224, 237, 242, 247, 258, 262, 273-274, 277-280, 282-284, 289, 293-294,
296-297, 299-300, 302-303, 306-308, 332-333, 338, 341-342, 345, 347,
350-352
process of production, 241
produced per man-year, 182
producer/employer, 278
producing a real product, 103
production and consumption economy, 103, 175, 207, 253, 254, 263, 299
productive assets, 50, 282
productive labor, 182, 295
Productive Loan , 127, 182 , 183
Productive of what? 324
productive role, 14, 33, 55, 90, 166, 198, 254, 293, 333
Productive vs. Unproductive Labor , 183
productive vs. unproductive, 182, 280
productivity gains, 78, 301, 318
productivity theory, 308
productivity, 30, 65, 77-78, 89, 98, 100, 105, 111, 120, 124, 145-146, 182-
183, 186, 193, 230, 254, 275, 277, 294, 296, 301, 308, 318, 329
produit net (net product), 177, 221
professional and intellectual gauntlet, 300
professional employment, 300
professional real estate developer, 173
professional success, 288-289
professionals, 182
Profit , 6, 19, 28, 30, 33, 35, 46, 49-50, 56, 58, 75-76, 84, 92-93, 96-97, 99-
102, 114, 120, 125, 127-129, 133, 135, 137-138, 146, 149-150, 152-153,
155, 157, 160, 165, 169, 171-172, 176-178, 180, 182- 183 , 184, 186-187,
194, 198, 200-201, 205, 208, 210, 216, 218, 222, 228, 230, 232, 243-244,
252-253, 255-258, 263, 274, 279-281, 283, 301, 307, 312, 316-318, 325,
340, 343, 351
profit add-ons, 244
profiteer, 8, 213
profit on capital, 96
profit-making business ventures, 127
profits, 6, 19, 28, 33, 35, 46, 49-50, 56, 58, 84, 93, 97, 99-102, 114, 120,
127, 135, 137-138, 146, 149, 152-153, 157, 171-172, 177-178, 180, 183,
186, 194, 198, 200-201, 205, 210, 216, 218, 222, 228, 232, 256-257, 263,
274, 281, 283, 301, 307, 316-318, 325, 340, 343, 351
profit-seeking, 153
profits for stock buybacks and higher dividend payouts, 316
profits on business capital investment, 84
profits on industrial capital formation, 186
Progress and Poverty (1879), Henry George, 107
Progress , 14, 24, 50, 56, 59, 91, 107, 112, 121, 155, 180, 184 , 213, 288,
299, 302, 307, 309, 321
Progressive Era democratic roots, 142
Progressive Era , 5-6, 9, 22-24, 42, 142, 151, 155, 184 , 196, 201, 211, 224,
259, 261, 293, 319
progressive tax policy, 202, 228, 270, 292
progressive taxation, 5-6, 23, 42, 104, 110, 196, 209, 222, 225, 231, 260,
272, 291, 293, 321, 335
proliferation of excise taxes, 280
promises of globalism, 352
promotion and advertising, 115
propaganda, 22, 25, 126, 228
Propensity to Save , 185 , 206
proper role and functions of government, 5, 76, 199
propertied class, 105, 172
property grabs, 66
property owners, 15, 202, 231, 242, 253-254, 266
property rights, 65, 103, 299, 331
property tax, 28, 78, 112, 128, 141, 198, 222, 227, 264, 301, 335
property taxation, 222
Property , 15-16, 18, 28-29, 32, 34, 39-40, 44-45, 54-56, 59, 63, 65-66, 72-
73, 78, 85, 90, 96, 98-99, 101-104, 107-108, 110-113, 120, 126-129, 139,
141, 143, 145-146, 149, 162, 166-167, 173-176, 185 , 197-198, 202, 204,
207, 217-218, 222-223, 226-227, 229, 231, 241-242, 252-258, 260, 264,
266-268, 278, 283, 293, 296-297, 299-301, 317-318, 320, 327, 331-332,
335-336, 344, 349-350
Proposition 13 (real estate taxes frozen), 222
Prosbul clause by which debtors waived their right to the Jubilee Year, 132
prosecute, 196, 216
prosecution of financial fraud, 243
prospective long-term earnings, 208
Prosperity , 15, 33, 45, 98, 112, 114, 128, 185 , 196, 202, 217, 231, 257,
264, 274, 287, 345
prostitutes, prostitution, 66, 182
Protecting Savings , 185
protection by government, 143
Protectionism , 52, 105, 186 , 199, 225, 291
protectionist nations, 169
protectionist, 31-32, 36, 76, 105, 169-170, 176, 187, 210, 237, 246, 294,
308, 353
protective counter-measures, 180
protective tariffs, 30-31, 91, 210
protector, 217
provide goods and services at lower cost, 168
provide social services freely or below cost, 266
proximity to schools, 114
pseudo-science, 133, 170
psuedo-countries, 171
psychological operations, 169
psychological satiation, 146
psychologists, 29
PSYOPS, 169
Ptolemaic astronomy, 272
Ptolemy v. Epiphanes, 203
public amenities, 114
public and private money creation, 156
public assets, 5, 60, 63, 72, 92, 186, 213, 258
public banking option, 346
public bureaucrats, 216
public choice, 200-201
public context, 224
public debt-money, 156
public debt, 10, 28, 44, 80, 109, 132, 138, 148, 156, 161, 194, 215, 233,
280, 312, 321
Public Domain , 23, 29, 34, 38, 60, 66, 73, 96, 100, 105, 114, 123, 140,
143, 148, 154, 161, 165, 181, 186 , 201, 208, 210, 228-229, 231, 244, 246,
255, 258, 266, 272, 274, 283, 288, 292, 296, 303, 312, 316, 328, 330-333,
336, 338, 340
public economic policy, 87
public education, 120, 312, 345
public enterprises, 53, 136, 160, 223, 283, 332
public functions, 160
public giveaways, 215
public infrastructure investment, 16, 42, 96, 112, 114, 202, 204, 226, 255-
257, 292, 303
public infrastructure spending, 6, 114, 133
public infrastructure’s aim is not to make a profit, 176
public institutions, 66, 109, 114, 159, 215-216, 330
Public Investment , 16, 19, 23, 92, 112, 114-115, 176, 181, 184, 186 , 211,
213, 256, 258-259, 293, 321
public land, 34
public money creation, 152, 191, 226
public monopolies, 23, 58
public monuments, 64
public opinion, 23, 74, 124, 304
public oversight, 28, 177
public ownership, 16, 52, 150, 168, 258
public purse, 114
public referendums, 213
public subsidy, 15, 53, 169, 244, 257, 294-295
public utility, 6, 10, 111, 129, 147, 157, 178, 181, 197, 224, 320, 341
public welfare recipients, 105
Public-Private Partnership , 51, 67, 187
Puerto Rico, 342
pulling up the ladder, 105
purchase price, 70, 162
pure competition, 224
pure theory, 169, 272
Pyramid , 6, 12, 41, 57, 98, 110, 127, 150, 155, 172, 187 , 191, 232, 299,
320-321, 354
Pyramiding , 44, 54, 79, 183, 187 , 287
Q
QE (Quantitative Easing), 189-190
quadruple U.S. public debt, 138, 194
quality of life, 287
Quandary , 3, 173, 189 , 217, 282-283, 285
quantification of capital, 11
Quantitative Easing (QE) , 5, 45, 50, 52, 63, 75, 143, 156, 159, 189 -191,
214, 233, 248, 257, 261, 263, 273, 316
quantitative statistics, 151
quantity or number, 286
Quantity Theory (Tautology) of Money , 33, 190- 191 , 308
quantity theory of money, 33, 190- 191 , 308
Quantum Finance , 191
quantum physicists, 191
quasi-rents, 86
quasi-saving, 78, 314
Queen Elizabeth, 87
quick bankruptcy, 280
quick price jumps, 223
quicksands of theory, 96
quid pro quo, 229
R
R
R2P (“Responsibility to Privatize”) , 142, 193
Rabbi Hillel, 132
Race to the Bottom , 3, 87, 94, 121, 171, 193 , 202, 230
racial minorities, 58
radical policy change, 279
radio and television frequencies, 186
railroad barons, 66, 99, 244
railroad monopolies, 107
railroads, 5, 29, 107, 114, 181, 186, 198, 223, 269, 278, 329
railway economics, 278
raising taxes, 10, 213, 283
rake-off, 51, 195, 318
Rand, Ayn, 111
ranking, 108, 199
ransom, 148
rate of 20%, 203
rate of consumer price inflation, 313
rate of depreciation, 173
rate of interest tends to settle at half the rate of profit, 183
rate of profit plus capital gains, 187
rate of surplus value, 97
rational expectations, 297
rational markets, 54, 129
rationale for cutting taxes, 218
raw materials, 27, 60, 65, 123, 128, 187, 202, 205, 241, 294
raw-materials exporter, 226, 237
re-definition, 105
re-inflate the economy, 46
reinvesting to expand, 316
reaction against Marxism, 306
reactionary methodology, 300
Reagan-Bush Administration, 138, 194
Reagan, Ronald, 222
Reaganomics , 138, 194 , 212, 223
real capital formation, 50
Real Economy , 53, 63, 124, 194 , 198, 233, 242, 323, 342
real estate brokers, 169
real estate bubble burst in 2008, 187
real estate families, 66
real estate hedge funds, 191
real estate speculators, 100, 278
Real Estate , 7-8, 11-12, 15, 18-19, 24, 27, 32-34, 39-40, 44-45, 50, 52, 55,
57-58, 66, 69, 73, 75, 79, 81, 83, 88, 93, 97-103, 106, 110, 112, 114-115,
122-123, 125, 127-129, 134, 136, 139-140, 142, 146, 152, 154-156, 159,
165, 167-169, 173-174, 176, 183, 187, 189, 191, 195 , 197-198, 200, 202-
203, 207-208, 217, 221-223, 227-228, 232, 237-238, 241, 243, 246, 252-
255, 257, 262-264, 273, 278, 280-282, 284-285, 295, 297, 300-301, 311-
313, 318-319, 329, 335-337, 342, 344-347, 349-350, 352, 354
real income, 191
real output, 15, 27, 94, 103, 194, 216, 249, 318
Real Wages , 98-99, 195 , 313-314, 316
Real Wealth , 8, 29, 45, 195 , 242, 280, 325
real-world phenomena, 300
realistic estimates for land, 252
realistic statistics, 281
realistic valuation, 87
reality economics, 10-11, 18, 43, 286, 300, 302
reality testing, 141
reality-based analysis, 6
reality-based critics, 94
reality-based economic principles, 266
receipt of land rent, 140
receivables, 206
recipients of economic rent, 295
reckless and fraudulent lending, 262
recognized positive contribution, 309
recorded history, 206
recovering, 228, 268
recovery of one’s investment, 173
recovery, 15, 46, 61, 84, 173, 205, 214, 230, 258, 283, 296, 299
recycle the interest, 101
Red Directors, 110, 136
redistribute income, 5
redistribute wealth, 302
redistributive exchange, 147, 330
refereed journals, 300
refineries, 172, 230, 351
Reform , 6, 9, 14-16, 19, 22-24, 35, 41-42, 55, 59, 63, 69, 85-89, 91-92,
108, 119, 146, 149-150, 155, 166, 177, 184, 196 , 198, 202, 211, 217, 224-
226, 228, 230, 239, 256, 259, 261, 267, 279-280, 292-294, 296, 298, 300-
304, 319, 325, 329, 331, 333, 335, 345-347, 349
reformers, 5, 8, 15-16, 23, 66, 86, 196, 210, 213, 223, 229, 268, 279, 291-
293, 295, 301-302, 319-320, 325
reframe popular perceptions of reality, 274
regime change, 23, 63, 123, 166, 211
regression analysis, 279
regressive tax policy, 14
regressive tax shift, 121, 181, 300
Regressive Taxation , 196
regular calendric basis, 197
regulate the economy, 109
Regulation , 15-17, 22, 35, 40, 42, 52, 55, 76, 86-88, 105, 119, 125, 142-
143, 147-148, 157, 166-168, 170, 196 , 199-201, 212, 224-226, 228, 239,
266, 285, 287, 291-292, 294-295, 303, 324, 328-329, 331, 333
Regulatory Capture , 52, 88, 109, 196 , 202, 228, 230, 243, 302, 312
regulatory paperwork, 170
regulatory policy, 184, 224, 266
rehabilitation courses in Reality Economics, 302
Reich, Robert, 30
Reichsbank, 116
reign, 85, 158, 225-226, 331
reinvesting interest, 209
Reiss, J., 277, 289
relationship between prices, interest rates or income, 247
relative fertility, 201
relevant facts, 271
religion as opposed to science, 89
religions, 206
religious hostility, 338
remove policy making, 197
rent grabbing, 200, 259
rent is conflated with profits, 318
rent is for paying interest, 115, 197
rent is now paid as interest to the bankers instead of as taxes to the public
sector, 154
Rent of Location , 75, 114, 139-140, 198 , 264
Rent Seeking , 8-9, 40, 55, 99, 105, 122, 128-129, 132, 167, 169-170, 196,
198 , 211, 216, 221, 225, 229, 268, 277, 297, 302, 327
rent takers, 295
Rent Theory , 24, 55, 59, 86, 139-140, 149, 183, 197, 200 , 277, 301, 303,
308, 319, 327
rent-yielding assets, 101
Rent , 3, 6-9, 11, 14-16, 19, 23-24, 28-29, 32, 40, 42-43, 49-60, 65, 67, 72,
75-78, 80, 83-87, 89, 91-94, 96, 99, 101, 103, 105, 107, 109-110, 112-115,
119-120, 122-123, 126-129, 132-133, 138-140, 142-149, 151, 154, 160-
161, 165-170, 174-178, 180-186, 188, 197 , 207-212, 216, 218, 221-225,
228-229, 232, 237-238, 241-242, 246, 249, 252, 254-256, 258-260, 264,
266-268, 272, 274, 276-277, 280-281, 291-295, 297, 301-303, 308, 312-
315, 317-319, 326-330, 333, 335, 341, 346-347, 350
Rent, Economic: See Economic Rent , 85; and Rent Theory ; 200
Rent, Monopoly , 6, 105, 167, 182, 197 , 293-294, 303
rental and tax tribute, 57
rental contract, 162
Rental Income (as distinguished from Economic Rent ), 128, 140, 173,
195, 197 , 227, 253-254, 264, 350
rental properties, 76
rentier advocates, 127
rentier censorial motto, 11
rentier class’s overhead, 182
rentier economies, 11, 20, 180
Rentier Income , 33, 92, 128, 139, 142, 146, 173, 176, 178, 181, 184, 191,
198 , 209, 239, 241, 252, 295-296, 302-303, 312, 318-319, 325
rentier overhead, 19, 94, 128, 142, 167, 294
Rentier , 3, 9-11, 13-16, 18-20, 22-23, 32-33, 38, 43, 49, 51, 58-59, 73-74,
76-78, 83, 86, 90, 92-94, 98-99, 103, 105, 107, 125, 127-128, 139, 142,
146, 148-150, 167, 172-173, 176, 178, 180-184, 186, 191, 194, 198 , 200,
208-209, 211-212, 214-215, 224-225, 231-232, 239, 241-244, 249, 251-
252, 254, 256-257, 259, 266, 269, 276, 281, 283, 291-296, 299-304, 312-
314, 317-320, 325, 347
rentiers oppose the fiscal power of democracies, 201
repayment time, 70, 185
repetition compulsion, 126
replacement cost, 75
replacement of elected officials, 70
replacing equity with debt, 101, 346
reported earnings, 34, 75
reported net savings, 282
Republic (380 BC), Plato, 23, 212, 239
Republican abolitionist, 210
Republican congress, 104
Republicans, 7, 30-31, 36, 104, 145, 344
reputation, 111
rescue, 12, 14, 97, 215, 231
research or development, 168
reserve deposits, 190
reserves, 38-39, 41, 53, 79, 98, 109, 157, 159, 178, 190, 248, 263, 317
resignation, 270
resource allocation, 87, 160
resource drain, 274
resource limits, 205
Responsibility to Privatize (R2P), 142, 193
restraints on greed, 111
resurgence, 108, 338
retail customers, 223
retirees, 44, 125, 160, 177, 189, 209, 245, 320, 342-343
retirement income has been financialized, 138
retirement savings, 190, 315, 342-343
retirement, 14, 44, 104, 122, 138, 159, 190, 206, 245, 311, 315-316, 342-
343
retrogression opposing modernity, 155
retrogression to feudalism, 214
return of capital, 75
return on capital (profit), 75
returns as a proportion of borrower’s gain, 208
reversing progressive taxation, 231
reversion to barter, 214
revisionist historians, 299
revive the economy, 263
reviving employment, 230
Revolt of the Barons, 140
revolution in fertilizers, 77
revolution, 10, 41, 58, 77, 90, 92, 94, 126, 149-150, 165, 182, 184, 212,
266, 275, 304-308, 333
revolutionary tactics, 150
reward, 50, 295, 302
rhetoric, 23, 42, 105, 138, 151, 231, 344
rhetorical system, 276
rhetorically camouflaged, 222
Ricardian free-trade theory, 31, 279
Ricardian socialism, 15
Ricardo brothers, 332
Ricardo, David (1772-1823) , 30-31, 54, 56, 58, 76-77, 85, 107, 117, 145-
146, 149, 154, 157-158, 197, 200, 201 -202, 207, 246, 277, 296, 303, 308-
309, 332
Riga Graduate School of Law, 334
Riga, 334-336
rigged market, 338
right wing, 39, 108, 135, 139, 211, 297, 329
right wingers, 333
rise in consumption levels, 153
rise in status, 93, 153
rise of a middle class, 184
rising debt service, 258
rising energy efficiency, 210
rising home ownership, 184
rising housing prices, 45
rising interest rates, 190
rising productivity, 65, 124, 230
rising tide of debt, 320
risk management, 76
risk, 8, 40, 70, 76, 99, 111-112, 122, 127, 133, 161-162, 171, 213, 325, 338
risky foreign investment, 286
risky ventures, 162
rival currency blocs, 123
Road to Serfdom , 12, 18, 23, 42, 74, 79, 105, 117, 119, 186, 201 , 228,
276, 288, 330-331, 354
roads, 42, 65, 96, 113, 148, 161, 181, 186-187, 198, 258, 288, 294, 328
robbers, 253
Robert Rubin’s gang, 162
Roberts, Paul Craig, 4, 350, 352
Robinson, Joan, 146
Rockefeller, David 310
Rockefeller, John D., 53
role of banks, 161
role of government, 76, 167, 293
role of government: productive or intrusive? 293
roll over debts, 154
rolling back democracy, 53
Roman creditors, 270
Roman Empire, 41, 73, 214, 324
Roman Empire, Western, 214
Rome’s harsh pro-creditor laws, 299
Romer, Paul, 151
Romney, Mitt, 64, 67, 145
Roosevelt, Franklin D., 40
Roscher, William, 277, 289
Rosen, Rebecca J., 24
Rosetta Stone , 69, 202
Royal Bank of Scotland (RBS), 223
royal fiat, 285
royal management, 86
Royal Mercury Mines in Spain, 60
royal practice, 59
royal price proclamations, 147
royal war debts, 161
royal wars, 30
Rubin, Robert, 162
Rubinomics (Robert Rubin), 334
Rucker, Philip, 67
Rueff, Jacques, 135, 308
rule by the few, 172
Rule of 72 , 61, 79, 93, 203
rules of exchange, 147
runaway carbon-based fuel emissions, 179
rural extension, 246
Russell, Bertrand, 103, 106
Russia-Asia financial crisis (1997), 110
Russia, 24, 49, 53, 65, 88, 90, 104, 110, 124, 147, 150-151, 155, 170, 172,
182-183, 196, 211, 226, 244, 280, 334-335, 337-338, 341
Russia’s October 1917 Revolution, 150
Russian “liberalism”, 88
Russian communism, 333
Russian dachas, 41
Russian oil exports through Ventspils, 335
Russian oil, 41, 335
Russian system, 341
Russian-speakers, 341
Ryan, Paul, 145
S
S-Curve , 46, 61, 84, 124, 205
S&Ls (Savings & Loan Banks), 132, 162
Sacramento, 190
sacred torch, 142
sadness, 269-270
Saez, Immanuel, 172, 296
safeguards against fraud, 76
Saint-Simon, Claude Henri de Rouvroy, Comte de (1760-1825) , 205
Saint-Simonians, 345
sale of cigarettes, 280
sale of degrees, 217
sales tax, 42, 78, 83, 102, 128, 221, 264, 314-315, 320, 346
salvationist military policy, 142
Samuelson, Paul, 306
sanctifying debts, 286
sanctimonious, 126
Sanctity of Debt vs. Debt Cancellation , 126, 135, 206 , 225
sanctity of debt, 126, 135, 206 , 225
Sapir-Whorf, 19
Sarkozy, Nicholas, 339
satellite currencies, 39
satiated, 111, 238, 245
satisfy, 238
Saudi Arabia, 80, 337
save and invest, 231
save the economy at large, 103
savers and creditors, 122
Saving (distinguished from Savings ), 12, 35, 39-41, 43, 65, 69, 78, 80, 93,
97-98, 100, 104, 121-122, 125, 135, 138, 143, 160, 168, 185, 188, 190, 206
, 233, 235, 252, 260-262, 278, 281-282, 286, 311, 314-316, 324
saving for pensions, 104
Savings (distinguished from Saving ), 5, 33, 39, 41, 57, 61, 65, 70-71, 79,
88, 90, 132, 135, 138, 148, 157, 160, 162, 173, 177, 185, 190-191, 194, 207
, 209, 222, 229, 257, 260, 266, 268, 281-282, 284, 286-287, 315, 342-343,
350
savings and debt, 90, 206, 281
Savings and Loan (S&L) fraud (1980s and 1990s), 194
savings do not accumulate exponentially without limit, 286
Say, Jean-Baptiste 54, 207
Say’s Law , 3, 54, 79, 84, 95, 135, 150, 177, 194, 205, 207 , 209, 211, 213,
215, 217, 219, 221, 232, 296
Scandinavian banks, 169, 335
scarce resources, 92, 284
scarcity of land, 197
scarcity, 114, 176, 185, 197, 284
Schadler, Susan, 340
Schoenhof, Jacob, 36
Scholes, Myron S., 170
schooling, 112, 311
schools, 31, 113-114, 186, 198, 200, 264, 288, 306, 309, 345
Schopenhauer, Arthur, 270
Schumpeter, Joseph, 46, 65, 84, 97, 330
Schwarzman, Steve, 29
science fiction, 21, 132, 170, 273
science of assumptions, 271, 273, 300
scientific knowledge, 255-256
scientists, 30, 77, 277, 287
scope of economic analysis, 299
scope, 11, 122, 127, 149, 217, 224, 242, 256, 277, 279, 291-292, 299-300,
302, 307, 320
Scotland, 9, 58, 223
Scudder Fund, 352
sea levels rise, 179
search for asset-price gains, 282
seasonal labor, 64
seasonal rhythms, 178
Second (“socialist”) International, 211
Second New Deal, 67
sect, 215
sectarian cults, 239
secular stagnation, 99
security for private property, 126
security of the whole society, 76
seize public assets, 213
seizure of land, 166
self-congratulatory language, 273
self-defeating, 193
self-destructive, 243
self-employed, 152
self-expanding, 65, 285
self-image of investors, 128
self-interest and policy pleading, 276
self-reinforcing tendencies of instability, 91, 180, 294
self-serving austerity doctrine, 126
self-supporting population, 111
self-sustaining individuals, 246
selling at a markup, 230
selling on credit, 318
selling to the government, 318
selloff, 70, 121, 141, 190, 209, 223, 244, 228, 265, 280, 286
semipublic, 52
Senior, William Nassau, 91, 94
serf, 71, 98, 142, 223, 244, 334, 337, 352
Serfdom , 3, 12, 14, 18, 22-23, 42, 44, 74, 79, 89, 105, 117, 119, 121, 151,
168, 173, 186, 200-202, 205, 207 , 209, 211, 213-215, 217, 219, 228, 270,
276, 287-288, 303, 324, 329-332, 354
serfs tied to the land, 166
servant of finance capital, 345
servants, 54, 131, 145, 182, 219
serve the economy, 161
services at cost, 186, 225, 256, 316, 328
set of values, 119
Seven Bankers, 88
Seven Deadly Innocent Frauds of Economic Policy (2010), Warren Mosler,
126
Seward, William, 30, 210
sexual categories (LBGTQ), 58
sexual identity, 345
shackles, 43
shape of social evolution, 278
shape popular attitudes, 168
share of taxes, 83
sharecroppers, 71
shared risk, 133
Shareholder Value , 208 , 316
Sharia Law , 69, 162, 208 , 238
sharp rise in U.S. public debt (1980s), 132
“sharpies,” 332
Sherman, John, 96
shifts in demand, 332
shipping affiliates, 229
shipping insurance, 134
shock and denial, 268
shock therapy, 65, 147
shocks, 297, 307
short term, 34, 292
short-run carrying charges, 269
short-run earnings, 101
short-sightedness, 248
short-term foreign exchange movements, 92
short-term, 34, 50, 54, 88, 91-92, 105, 122, 170, 178, 304
short-termism, 123, 168, 208, 243, 284
shorter work weeks, 89
shortfall in purchasing power, 318
shortfalls in the rate of return, 189
shrinking economy, 258, 320
shrinking government, 201-202, 237, 265
shrinking, 45, 103, 126, 140, 143, 166, 168, 195, 226, 258, 265, 282, 320,
336
sidewalks, 161
silent partner, 57, 183, 210
Silver and Gold (1895), John Sherman and William B. Allison, 96
silver and gold were minted in ancient temples, 216
silver and gold, 86, 96, 214, 216
silver, 27, 35, 86, 96, 131, 147, 156, 158-159, 214, 216, 225
simple interest, 61
simplistic mathematical resolution, 267
since 1980, 84, 108, 161, 181, 186, 312, 319, 349
Sinclair, Upton, 53, 87
sine wave, 46
Single Tax , 9, 107, 113, 139, 141, 165, 208
Sinking Fund , 85, 104, 146, 209
siphoning off wealth, 123
site value, 75, 114, 227, 264
skepticism, 152
skilled labor emigrates, 283
skilled labor, 219, 274, 283
slave owners, 31, 32, 302
slave states, 31
slave trade, 44
slaves, 31-32, 65, 131, 302
Sleeping and Eating , 209
Sleeping Partner (AKA Silent Partner) , 183, 209- 210
Slim, Carlos, 197
slows economic growth, 61, 243
small businesses, 152
small changes, 146, 191
smart innovators, 296
smash and grab, 334, 337, 340
Smith, Adam : See Adam Smith , 28
Smith, E. Peshine (1814-1882) , 12, 30, 77, 186, 210
smuggling, 66
soaring stock and bond markets, 191
social arrangement, 214
social chaos, 96
social cohesiveness, 57
social construct, 139
social control function, 109
social costs, 60
social decay, 184
social democratic party, 150
social development, 279
social justice, 154
social ladder, 153
Social Market , 168, 211 , 215, 223
social obligations, 214
social organism, 120
Social Security contributions, 44, 319, 343
Social Security tax on employees, 194
Social Security, 5, 7-8, 12, 30, 42, 44, 53, 64, 78, 83, 98, 104, 138, 145,
160, 168, 191, 194, 196, 199, 206, 209, 221-222, 233, 256, 260-261, 312,
314-315, 319-321, 336, 343, 346, 354
social shaping of markets, 228
social spending programs, 42
social system, 51, 80, 219
social welfare spending, 212, 246
social welfare, 77, 212, 226, 246
Socialism for the Rich : See State Socialism , and 161, 211, 215 , 233, 320
Socialism , 15-16, 19, 59, 63, 90, 148-151, 153-154, 161-162, 167, 200,
210 , 215, 229, 233, 293-294, 303, 319-320, 329, 333, 342, 347
socialist economies, 103, 294
socialist policy, 170, 187, 210-211, 215
socialist reforms, 35
“socialist” as an epithet, 224
socialized medicine, 215
socializing the risk, 161
socially coercive and unfair, 295
socially desirable investment, 178
socially engineered, 242
socially necessary costs, 105, 134, 241
societies are multilayered, 273
society as the ultimate human product, 149
Society , 5, 7, 9, 14, 18-19, 25, 29, 32, 38, 46, 55, 59-60, 74, 76, 87, 89, 92-
93, 105, 112, 119-120, 124-125, 127, 136-137, 139, 148-149, 154-155, 157-
158, 160, 163, 167, 171, 174, 183-184, 196-197, 202-203, 210, 212 , 221,
223-224, 226-229, 238-239, 245, 266, 276-277, 281, 291-293, 295, 300,
302-304, 318-319, 321, 324, 327-328, 330-331, 333-334, 345, 347, 353
society’s victors, 221
sociologists, sociology, 29, 31, 67, 126, 141, 188, 276, 293
Socrates (470-399 BC) , 29, 120, 212 , 232, 251
Soddy, Frederick, 99, 106, 128, 196, 199, 242, 245
soil depletion, 210
soil fertility, 76, 112, 114
solar system, 272
sold on credit, 100
soldiers, 41, 159
solidarity, 57-58
Solon’s reforms in Greece, 69
solution, 52, 78, 93, 102, 106, 124, 141, 189, 224, 237, 242, 268, 280, 282,
296, 300, 332, 335, 345
solvable problems, 282
solvency of debtors, 97
solvency, 52, 73, 97, 131, 262
Sombart, Werner, 50, 209
someone else’s expense, 111
Sommers, Jeff, 334
Sophist rhetoric teachers, 231
Sophist School, 251
sophistry, 23-24, 52, 218, 226, 251-252, 264, 266, 286
“Sorry you lost your job”, 174, 223
sound money, 133
source and sponsor of financial overhead, 243
source of income, 56
South Africa, 53
South Carolina, 63
South Korea, 268, 270
South Pacific, 172
South Sea bubble, 44
South Sea Company, 44, 60, 161, 197
South, 31, 44, 53, 60, 63, 161, 172, 197, 268, 270, 286, 350
Southern Europe, 326, 338
Southern plantation crops, 210
Southern states, 71
Sovereign Debt , 213
sovereign states, 109
Sovereignty : See Government , 109; Money , 158; and 213, 237
Soviet government bureaucracy, 57
Soviet leadership, 335
Soviet model, 303
Soviet Russia’s totalitarian state, 211
Soviet statisticians, 182
Soviet Trade Office, 41
Soviet Union, 41, 56, 65, 88, 90, 110, 136, 151, 167, 181, 334-335, 337
Soviet vs. capitalist world dominance, 245
Soviet, 22, 41, 56-57, 60, 65, 88, 90, 104, 110, 136, 151, 167, 181-182, 202,
211, 226, 245, 280, 303, 328, 334-335, 337-338
space exploration, 153
Spain, 53, 60, 71, 208, 230, 269
Spanish America, 71
special interest benefiting, 248
special interest, 15, 18, 42, 120, 129, 133, 141, 248, 274-276, 344
special privileges, 22, 98, 122, 199, 291
special subsidies, 129
specified return, 187
speculative finance, 184
speculative gains, 223, 261
speculators, 5, 7, 38, 44, 50, 100, 114, 147, 201, 223, 276, 278, 343
Spencer, Herbert, 154, 277, 301
spending, 6, 10, 34, 38, 42-43, 46, 51-54, 57-58, 64, 70, 77-79, 84, 86, 89,
93, 97, 99, 101-103, 108-109, 113-114, 116, 121, 124-125, 129, 133, 135,
142, 152-153, 155-157, 159, 163, 168, 172, 174, 186, 190, 193, 201, 206-
207, 212, 215, 222, 224, 230, 232-233, 246, 256, 258-259, 263, 265, 283-
285, 293, 296, 298, 312, 314-315, 336, 346
Spitzer, Eliot 99
spoils of war, 181
spur direct investment, 248
squeezing a tax surplus out of the economy, 135
Stabilization Program , 35, 121, 213
stabilizing checks and balances, 180
stable trajectory, 180
Stages of Development , 180, 184, 213 , 223, 279
Stagflatio n, 142, 214
stagnation, 46, 85, 99, 126, 214, 217
Stalinism , 90, 151, 211, 215 , 336
Stalinist Russia, 155
standardized interest and wage rates, 86
starting point for the study of economics, 287
State Department, 172, 341-342, 351
state land-grant colleges, 31
state of equilibrium, 91, 283, 294
state ownership of the means of production, 151
State Socialism (“socialism for the rich”) , 19, 153, 161, 211, 215 , 233,
294
State Theory of Money , 27, 53, 104, 109, 157-159, 215 , 221, 230
state-run enterprises, 42
statistical analysis, 208
statistical evidence, 287
statistical testing, 309
statistics, 6, 8, 11, 17, 27, 50, 66, 78, 84, 87, 92, 129, 151, 172, 183, 201,
221, 230, 252-254, 257, 268, 271, 280-282, 300, 302, 314, 318-319, 349,
351
status as citizens, 232
status as human beings, 149
status as wage earners, 152
status quo economics, 279
status quo, 11, 59, 63, 90-91, 119-120, 170, 212-213, 223, 242, 256, 279,
291, 293, 297, 299, 302, 307
status quo’s dominant players, 212
steel workers, 182
steel, 182
steer funds into the stock market, 160
Stein, Herbert, 204
Sterile , 216 , 249
sterling, 116, 213
Steuart, James, 86
stimulate new investment, 143
“sting” of usury (Socrates c. 400 BC), 232
stock buybacks, 317, 343
stock market boom, 7
stock market bubble, 44, 98, 194, 286
stock market, 7-8, 44, 52, 92, 97-98, 104, 137-138, 160, 170, 189, 194, 209,
225, 246, 260, 282, 284, 286, 312, 343, 345
stock options and bonuses, 316
stock price, 7, 34, 44, 50, 101, 122, 138, 148, 160, 177, 208, 317
stock-market bubbles, 229
stockholders, 51, 67, 132, 174, 228, 342, 346
Stockholm Syndrome , 24, 217 , 225, 231, 251, 316
Stoic Roman historians, 216
stone pyramids, 187
strategic sabotage, 242
strategy, 44, 50, 57, 63, 67, 123, 129, 133, 150, 174, 197, 202, 287, 297,
319, 325, 337-338
Strauss Kahn, Dominique, 340, 339
Strauss, Leo, 23, 25
streamlined competitive economy, 292
stretch the envelope, 99
strike, 110-111, 150, 230, 291
strong government, 114, 200, 301
Strong, Benjamin, 97
structural limits to the ability to pay, 135
Structural Problem , 52, 90, 146, 158, 217 , 224, 258, 294, 300
structural quandary, 285
Structuralist School, 308
structure of society’s long-term transformation, 277
struggling with success, 199
student debtors, 71
student debts, 191
Student Loans , 20, 37, 93, 102-103, 122, 168, 217 , 346
subject populations, 167
subordinating finance to fund industry, 345
subprime, 21, 37, 132, 134
subsidies for rentiers , 83
subsidize free loaders, 105
subsidize heavy industry, 153
subsidize prices, 148, 258
subsidize the production of orphans, 246
subsidize, 42, 80, 105, 148, 152-153, 215, 237, 246, 258
subsidized, 40, 63, 176, 184, 208, 225, 233, 256, 303, 316, 328
subsidizing exports, 186
subsistence wages, 58, 303
subsistence, 32, 41, 58, 74, 139, 146, 166, 168, 181, 201, 243, 270, 299,
303
subsoil mineral rights, 139
subtrahends, 168
subways, 223
success in the marketplace of economic fads, 310
successful protectionist U.S. policies, 246
sucker, 8, 227
Sumer and Babylonia, 59, 131
Sumer, 27, 59, 69, 131
Sumer’s temples, 27
sun’s energy, 177
Super Imperialism (new ed. 2003), Michael Hudson, 67, 129, 353
super imperialism, 67, 129, 353
Super Profits , 218
super-rich, 169
superfluous economics, 306
suppliers, 206
supply and demand, 111, 119, 217, 247, 278, 300
supply creates its own demand, 207
Supply-Side Economics , 218 , 231, 297
Supreme Court Ruling, 64
surplus of food, 187
surprise, 238, 275
survival is the prime need, 173
survival, 40, 131, 173, 326
Suskind, Ron, 344
suspend disbelief, 33, 170, 273
Sustainability , 61, 72, 120, 178, 203, 204, 218, 219, 224
Swedish Bank, 169
Swedish Royal Academy, 309
Swift, Jonathan, 298
Switzerland, 161, 172, 351
Switzerland’s secret banking system, 351
symbiotic finance, insurance and real estate (FIRE) sector, 312
synthesis, 126
Syria, 124
systemic problem, 33, 74
Systems Analysis , 73, 91, 93, 219 , 247
T
Tableau Économique , 54, 75, 86, 165, 177, 221
tacit assumption that all other things remain equal, 247
tactic, 14, 17, 44, 60, 150, 332
Tahitian suicide rates, 19
take home, 78, 168, 314
take over governments, 57, 155
takeover of government by force, 150
takeover target, 208
taking money out of the economy, 10
tangible assets, 50, 242
tangible investment, 51, 232, 285
target companies, 178
tariff protection on imports, 186, 231
TARP (Troubled Asset Relief Program), 298, 344
tautological models, 91
tax assessor, 115
tax avoidance, 27, 77, 138, 172, 351
tax avoiders, 171
tax base, 5, 54, 254, 264
tax benefits, 101
tax burden is not evenly distributed, 58, 78, 109, 128, 200, 202, 221, 264,
287, 320
tax code, 231, 253
tax collector, 27, 101, 128, 132, 140-141, 222, 264, 282
tax credit, 53, 173
tax deductible, 97, 253, 345
tax exempt, 28, 132
tax favored, 183
tax favoritism, 143, 225, 243, 253, 257, 268, 314-315, 320
tax free, 229
tax havens, 49, 171, 218
tax loopholes, 28, 104, 225, 269
tax obligations, 53, 158
tax policy, 9, 14-15, 24, 78, 115, 161, 196, 202, 212, 228, 269-270, 292,
294, 300, 315, 336
tax records and statistics, 268
tax shift off the One Percent, 314
Tax Shift , 34, 54, 102, 104, 109, 111, 121, 138, 181, 194, 196, 218, 222 ,
241, 268, 312, 314, 336
tax system, 200, 346
tax without an economic return, 133
tax-avoidance centers, 83
tax-deductible depreciation, 83
tax-deductible interest, 83, 181
taxable profit, 97, 127, 230, 252
taxable revenue, 165
taxation of land, 16
Taxation , 5-6, 15-16, 23, 29, 42, 52, 75, 86-87, 104-105, 109-110, 142,
165-167, 171, 173, 181, 196, 200-201, 209, 211, 221-222, 224-225, 229,
231, 241, 253, 260-261, 272, 280, 291, 293, 297-298, 303, 321, 325, 331,
335, 351
taxes and fees, 156, 215, 221
taxpayer bailouts, 53, 161
taxpayers, 38, 57, 102, 114, 156, 162, 230, 342
Tcherneva, Pavlina R., 162, 179, 188
teachers, 182, 231, 251
teaching positions, 300
techniques of acquisition, 251
Technocracy Inc., 136
technological optimism, 31
technology by itself, 318
telecommunications, 32
Teleology , 213, 222
telephone systems, 186
Templars, 216
temples, 27, 35, 86, 139, 147, 151, 155, 158-159, 214-216, 225, 330
temporary illiquidity, 18, 38, 262
temps, 148
terrorizing people, 228
textbook writers, 272
textile mills, 181
Thaer, Albrecht, 77
Thatcher, Margaret (1925-2013) , 17, 43, 88, 120, 125, 137, 148, 161, 202,
211-212, 215, 223 , 228, 260, 266, 292, 328, 330, 345
Thatcherism, 223
The 99 Percent ( See Ninety-Nine Percent ), 169
The Apologetic, 133
The Big Short (2010) Michael Lewis, 21
The Bubble and Beyond (2012), Michael Hudson, 11-12, 34, 69, 80-81,
129, 235, 311, 353
The City of God (426 AD), St. Augustine, 66
The Economist , 79, 81, 120, 155
the economy’s problem is the one percent’s windfall, 283
The End of History and the Last Man (1992), Francis Fukuyama, 88
The Failure of Laissez Faire Capitalism and Economic Dissolution of the
West (2013), Paul Craig Roberts, 352
The Fed blocked the FDIC from taking over insolvent Citigroup, Bank of
America and Wall Street Firms in 2008, 230
The Fed, 43, 50, 97-98, 156, 190, 230, 248, 262-263
the final stage, 51, 207, 214, 232
The Goose Step (1923), Upton Sinclair, 53
the idle rich, 198
The Lost Tradition of Biblical Debt Cancellations (2017), Michael Hudson,
35, 203, 353-354
the market’s major beneficiaries – and victims, 224
“The Market” , 6-9, 11, 14-17, 20-23, 27-29, 33-34, 39-46, 51-56, 63-67,
70, 72-73, 75-76, 78-79, 85-88, 91-94, 97-98, 101-102, 104-105, 108-110,
112, 116-117, 119-120, 124-125, 127, 129, 133, 137-140, 142-143, 146-
148, 155-156, 159-160, 167-170, 174, 176-177, 179-182, 184, 189-191,
194-197, 200-202, 204, 207, 209, 211-212, 214-216, 223 , 234, 239, 241,
244, 246, 248, 256-257, 259-264, 266, 268-269, 273-274, 277, 280-282,
284, 286-287, 292-297, 299, 301, 303-304, 308, 312, 315, 317-319, 325,
327-329, 331, 333, 337-338, 343, 345, 347, 349
the miracle of compound interest, 38, 62
the mob, 167
the more one has, the more one wants, 111
the mother of monopolies, 161
the needs of the American people as a liability, 351
the new class (1957), 57
The New York Times , 47, 95, 106, 134, 157
The New Yorker , 25, 344
the One Percent’s euphemism for itself, 313
the oppressed, 116
the poor, 54, 142, 146, 173, 231
the press, 141
the public interest, 126, 179, 292, 352
the public, 5, 10, 19, 24, 27-29, 34, 39, 43, 53, 60, 66, 92, 96, 100, 102,
105, 109, 112, 114, 126, 129, 133, 140-143, 147, 154, 157-158, 161, 179,
181, 185, 187, 191, 194, 202, 208, 210, 228-229, 231, 244, 256, 258, 266,
272-274, 283, 287-288, 292, 296, 303, 312-313, 316, 321, 326, 328, 330-
333, 336, 352
the real world in which people live, 274
the rich, 23, 30, 161, 211, 215, 231, 233, 272, 307, 320
the right sector, 341
The Road to Serfdom (1944), Frederich Hayek, 18, 23, 117, 119, 200-201,
276, 288, 330-331
the root of evil, 251
The Run Upon the Bankers (1734), Jonathan Swift, 298
the side of labor, consumers and debtors, 345
The South, 31, 44, 60, 172, 197
the system is torn apart from within, 285
The West, 41, 55-56, 65, 73, 88, 110, 151, 183, 341, 352
the world’s labor, 166
theft, 66, 138, 185, 204, 328-329
theocratic blueprint, 239
theological Deism, 129
theoretical excellence, 272
theories are static, the world dynamic, 307
theories of progress, 184
theories of surplus value, 150, 162, 182, 219
Theory of Moral Sentiments (1759), Adam Smith, 128
theory of the atom, 307
Theory of the Leisure Class (1899), Thorstein Veblen, 242
there is an alternative, 10, 287, 345
There Is No Alternative (TINA), 19, 88, 155, 223, 227 , 292, 345
there is no such thing as society, 120, 148, 212, 223, 228, 266
there’s one born every minute, 227
things that can’t go on forever, don’t, 204
think tanks, 288
third world bond-buying in the 1970s, 116
third world debtors, 60, 116
third-world debtor economy, 91
Thomas Nast’s 19th-century political cartoons, 209
Thorstein Veblen Society, 7
Thorstein Veblen Theorem : 114, 227 , 242, 257
Thrasymachus, 29
threat of Russian aggression, 337
threaten, 73, 123, 209, 225, 238, 260, 287, 302, 304, 333
Through the Looking-Glass (1871), Lewis Carrol, 14
time of troubles, 89
time-honored free lunch, 225
TINA (There Is No Alternative) , 19, 88, 155, 223, 227 , 292, 345
Tinbergen, Jan, 169, 309
to deprive, 125, 181
to rob, 181
to rule (as in regal), 196
tobacco, 210
today’s rapidly deteriorating status quo, 297
toll road, 200
tollbooths, 96, 139, 181, 294, 328, 341
Too Big to Fail/Jail , 66, 161, 171, 227 , 262
top of the social pyramid, 98, 127, 299
top-heavy overhead, 298
torch of Western civilization, 296
total chaos, 167
Total Return , 50, 78, 83, 100, 183, 187, 228 , 252, 256, 315, 319
Totalitarian , 53, 155, 168, 211, 228 , 325-326
toxic mortgages, 219
trade deficits, 41, 52, 116
trade dependency, 31, 52, 246
trade imbalances, 294
trade policy, 86, 105, 178, 294, 306
Trade, Development and Foreign Debt (new ed. 2009), Michael Hudson,
94, 305, 353
trader, 31, 191, 209, 275-276
trading affiliates, 171, 230
trading and currency clearing, 124
trading fees, 99
trading monopolies, 161
trading privileges, 161
trading, 8, 99, 124, 131-132, 161, 171, 197, 230, 248, 294, 330
Tragedy of the Commons , 60, 229
trained incapacity, 33, 59, 141, 242
training, 8, 84, 141, 218, 307, 321
trajectory of reality, 176
Trans-Pacific Partnership (TPP), 109
Transaction Cost , 170, 225, 229
transfer of property, 32, 102, 104, 283
Transfer Payment , 8, 85, 94, 103, 105, 107, 174, 216, 229 , 241, 249, 253-
254, 266, 280, 295
Transfer Price , 172, 229 , 230, 351
transfers assets, 101, 123
transfers income upward, 181
transition from serfdom, 151
transparent, 341
transportation, 34, 77, 112-114, 129, 148, 161, 186-187, 193, 223, 255-
256, 258-259, 264, 316, 321, 328, 346
trapping would-be reformers into an anti-reform methodology, 301
Traumatized Worker Syndrome , 110-111, 169, 230
travesty, 24, 56, 86, 128, 151, 200, 225-226, 304, 330, 336
treason, 268
treasury debt, 38, 53
Treasury IOUs, 38, 159
Treasury , 10, 38, 52-53, 55, 79, 97-98, 104, 106, 109, 156, 159, 168, 184,
188, 197-198, 202, 209, 215, 230 , 234, 262, 265, 282, 287, 302, 343, 350-
352
Treatise on Money (1930), John Maynard Keynes, 136
Trickle Down Economics , 3, 23, 42-43, 119-121, 128, 133, 150, 218, 221,
223, 225, 227, 229, 231 , 233, 235, 238, 261, 268, 275, 300, 316
trickle-down strategy, 133
Troika, 339-340
Trotsky, Leon, 350
Troubled Asset Relief Program (TARP), 298, 344
true believers, 74, 170
Trump, Donald 173, 344
trust funds, 177, 245
trust-fund children, 80
trusts, 42
Truthiness , 59, 95, 151, 232
tuition fees, 251
Tullock, Gordon,199, 204
tunnel vision, 33, 87, 93, 120, 127, 141, 158, 169, 201, 247-248, 277, 297,
300, 302, 304
tunnels to New York City, 193
Turkey, 332
Turkish tribes, 57
tutors, 182
TV stations, 74
Twenty-First (21 st ) Century, 142, 351
two different directions, 299
two dimensions, 248
Two Economies (chart), 233
Two Economies , 103, 194, 232 , 252, 254, 317
two types of inflation contrasted, 313
two variables at a time, 247
U
U.S. advisors, 88, 334
U.S. agriculture, 246
U.S. Cold War victory, 244
U.S. Congress, 29
U.S. credit card companies, 70
U.S. Defense Department, 168
U.S. diplomacy, 166, 172, 328
U.S. diplomats, 38, 123
U.S. dollar, 75, 79, 172, 351
U.S. economic policy, 350
U.S. farm exporters, 275
U.S. geopolitics, 53
U.S. government agencies, 74
U.S. Income Tax (begun 1913), 257
U.S. oil industry balance of payments, 351
U.S. payments deficit, 38
U.S. Supreme Court, 64
U.S. tax law, 98, 173
U.S. tax rate on capital gains, 50
U.S. treasury, 38, 53, 79, 106, 109, 159, 168, 184, 188, 234, 350-352
U.S. unilateralism, 55
U.S.-centered globalism, 55
U.S.-Soros strategy in Ukraine, 337
Uber, 152-153, 163
Ukraine debt crisis, 340
Ukraine industrial heartland, 341
Ukraine, 277, 326, 332, 337-338, 340-341
Ukrainian loan, 341
Ukrainian national guard, 341
ultimate stock price decline, 160
UMKC Economics Department, 10
untaxing monopoly capital, 59
unable to buy what they produce, 123
unbridled markets, 224
under water, 46, 90
Underdevelopment , 60, 237 , 244
underlying assumptions and postulates, 309
underlying symmetry, 307
underwriting fees, 99, 223, 244, 328
undesirable overhead, 182
Unearned Income , 3, 9, 11-13, 15, 18-20, 24, 55, 58-59, 74, 86, 94-95,
103, 107, 125, 127, 149, 166, 178, 185, 198, 200-201, 221, 225, 232, 237 ,
239, 246, 254, 291, 295, 303, 317, 319, 324-325, 327, 347
unearned increment, 154, 246, 255, 320
unelected central planners, 60
unemployment insurance, 152
unemployment, 10, 34, 45, 75, 79, 97, 109, 145, 152, 160, 176, 199, 212,
217, 268, 284-285, 343
unequal power relationship, 93
unethical, 36, 111
Unexpected , 87, 237
unfree world, 287
unfriendly takeover, 178
unified field theory, 307
uniform commodities, 182
uninsured depositors and bondholders, 231, 344
uninsured depositors, 38, 162, 230-231, 344
unionization gains, 196
unipolar ideology, 166
unique economic power, 166
United Fruit Company, 22
United Kingdom’s National Accounts, 50
United States, 5, 10, 31-32, 35-36, 38, 41, 49, 53, 55, 61, 63, 72, 75, 78, 88,
97, 104-105, 109, 123, 128, 141-142, 156-157, 161, 165, 169, 172, 175,
185-186, 190-191, 197, 209-210, 222, 225, 227, 230, 260, 265, 268-269,
275, 281, 293, 298, 330, 335, 338, 346
universals, 127
University of Pennsylvania, 31, 176
“University of Standard Oil,” 53
unlimited paper losses, 173
unmanaged commons, 229
unnecessary costs, 149, 318
unnecessary expenses, 319
unnecessary, 6, 9, 90, 149, 239, 244, 256, 278, 293-295, 303, 318-319
unpayable debts, 277
unproductive debt, 202, 345
unproductive investment, 183
unproductive labor, 8, 182, 325
unproductive lending, 72
unproductive, 8, 15, 72, 90, 182-183, 202, 216, 219, 280, 287, 292, 295,
302-303, 325, 345
unrealistic assumptions, 120
unrealistic mythology, 227
unscrupulous investment bankers and traders, 191
untaxed capital gains, 225
untaxing finance and property, 99
untestable, 309
upper management, 260
upward flow of property and income, 283
urban politics, 114
urbanized or commercial areas, 112
use of algebraic symbols and quantitative data, 151
useful idiots, 59, 120
user fee, 103-104, 112, 196, 200, 209, 221-222, 233, 312, 320
users of public services, 145
using rental income to carry a bank loan, 198
using your home as a piggy bank, 206
usufruct (net product), 65
usurer, 216, 238
usurious, 72, 105, 150, 319, 347
usury limits removed (1980s), 127
usury polarizes economies, 238
Usury , 13, 30, 127, 162, 180, 185, 208, 216, 224, 226, 231-232, 238 , 249,
270, 312
usus fructus , “use of the fruits”, 238
utilitarian revolution, 305
utility bills, 168
Utility Theory , 111, 146, 149, 238 , 278
utility, 6, 10, 34, 94, 111, 125, 129, 146-147, 149, 156-157, 168, 178, 181,
197, 224, 238-239, 241, 275, 278, 288, 292, 295-296, 301, 308, 320-321,
341
Utopia (1516), Thomas More, 239
Utopia , 239
Utopian Economics , 239
utopian ideal, 131, 239
utopian religious plan, 294
utopian socialism, 15
V
Value Added Tax (VAT Tax) , 121, 145, 167, 196, 221, 241 , 320
value and price theory, 9, 15, 107, 301
value creation, 14
value from obligation, 107
value from production, 107
value judgments questioning the status quo, 242
value of all corporately owned land, 281
value premises, 276
Value-Free Economics , 15, 182, 242
value-free reaction, 216
value-free theory, 287
Value , 8-9, 14-15, 18-19, 27, 35, 39, 45, 55, 58, 65, 75, 78-79, 85-87, 90,
96-98, 101, 103, 107, 112-115, 121, 127-129, 133, 138, 140, 143, 145-146,
148-150, 156-160, 162, 167, 173, 181-182, 190, 195-198, 202, 207-208,
210, 215-216, 219, 221, 227, 232, 241 , 249, 253-255, 257, 264, 276, 278-
279, 281-282, 287, 292, 294-295, 301, 303, 308, 316-317, 320, 326-327,
332, 335, 337, 350-352
value, price and Rent Theory, 86, 149, 301, 303
vanden Heuvel, Katrina, 174
vanguard, 160, 163
Varoufakis, Yanis, 14, 268, 339
VAT tax, 121, 145, 167, 196, 221, 241, 320
Veblen, Thorstein (1857-1929) , 7, 9, 12, 33, 52, 59, 87, 93, 112, 114-115,
117, 126, 141, 146, 165, 175, 200, 227, 234, 242 , 257, 275-277, 333, 353
Vested Interests , 3, 14, 16, 21-22, 41, 63, 74, 91, 93, 109, 119-120, 126,
132, 142, 150, 180, 196, 198-199, 211, 216, 218, 224-225, 242 , 270, 276,
288, 291-292, 295, 300, 302, 319
Vickrey, William,169-170, 272, 289
victimization, 284
victims, 37, 66, 116, 126, 146, 191, 224, 227-228, 238, 243, 279, 338
victors, 14, 18, 21, 140, 221
victory gardens, 41
Vietnam War, 38, 159, 214, 338
villain, 66, 337
violation of IMF rules, 340
violence, 120, 150
violent creditor oligarchies, 237
Virtual Reality , 242
Virtual Wealth , 99, 106, 128, 166, 196, 242 , 244-245
visual landscaping, 114
vocabulary-poor, 20, 116
Voltaire, 16
volume of debt, 20, 40, 65, 72, 102, 104, 133, 214, 266
volume of U.S. student debt, 217
voluntary contracts, 212
voluntary exercise, 295
voluntary, 148, 206, 212, 292, 295, 315
von Böhm-Bawerk, Eugen, 121, 301
von Liebig, Justus, 77
von Mises, Ludwig, 152, 199
von Thünen, Heinrich, 77, 114, 198, 200
voters get what they vote for, 261
voting along ethnic lines, 337
voting rates fall, 270
vouchers, 136
vulture funds, 213, 296
vultures, 283
W
wage and profit rates, 169
wage earners, 20, 40, 57-58, 78, 100, 102, 111, 129, 152-153, 168, 174,
211, 281, 314-315, 319-320, 346
wage earners/consumers, 102
wage labor, 32, 49, 149, 151-152, 183, 206
wage levels, 17, 30, 45, 76, 78, 146, 148, 184, 203, 213, 260, 263, 284, 307,
336
wage withholding, 7, 64, 83, 104, 195, 209, 222, 315
wages earned by labor, 84
wages, 5-6, 19, 31-32, 36, 44, 46, 54, 56, 58, 63, 70-71, 73, 77-78, 84, 91,
97-99, 102, 106, 108-112, 121, 125, 129, 135, 137, 146, 149, 152-153, 159-
160, 168, 174, 176-178, 182, 184, 190, 193-195, 200, 202, 205, 207, 209,
214, 230, 232, 243, 247-248, 257-258, 260, 263, 268, 274-275, 281, 287-
288, 298, 303, 307, 312-318, 325, 334, 342, 346, 352
wait their turn, 237
Wall Street casino, 51, 340
Wall Street insurers, 340
Wall Street Journal , 163, 190, 192, 340
Wall Street , 7-8, 12, 14, 16, 24, 29-30, 36, 42-45, 51, 55, 66, 74, 88, 99,
106, 109, 123, 142, 156, 160, 163, 169, 171-172, 177, 184, 188, 190-192,
196-197, 202, 228, 230, 234, 243 , 253, 261, 263, 276, 299, 312, 324, 331,
333-334, 340-345, 350-351, 354
Wall Street’s “smart boys”, 191
war between creditors and debtors, 40, 56
war debts, 15, 59, 85, 161
war economy, 211
war in Southeast Asia, 142
war widows and children, 245
War , 15, 19, 21-24, 30-31, 36, 38, 40-41, 52, 55-57, 59-60, 80, 85, 97,
108-110, 116, 123-124, 127, 135, 142, 149-151, 156-157, 159, 161, 165-
166, 168, 173, 177, 181, 184, 186, 201-202, 209, 211-212, 214, 225, 232,
239, 244 , 245, 258, 265, 280, 286, 288, 330, 333, 338-341, 345
Warburg, Paul, 98
warfare, 12, 133, 167, 280, 283, 286, 331, 353
warlord aristocracies, 161
Warren, Elizabeth, 268
Washington Consensus , 14, 39, 49, 53, 57, 63, 74-75, 80, 90, 92, 96, 121,
123, 126, 132-133, 136, 153, 166, 172, 181, 193, 196, 201, 213, 237, 244 ,
246, 274, 283, 328, 332
waste, 174, 219, 298
water and power, 186
water levels, 84
water power, 210
water, 5, 46, 58, 60, 84, 90, 96, 114, 128, 139, 181, 186-187, 197, 210, 244,
255, 259, 294, 316, 321
waterboarding, 169
Watered Costs , 148, 174, 242, 244
Watered Stock , 99, 244
watering down, 244
way of life, 172
we owe it to ourselves, 313
weak and needy, 245
Wealth Addiction , 3, 29, 74, 111, 115, 146, 238, 243-244, 245
wealth concentration, 296
Wealth Creation , 14, 29, 33-34, 45, 51, 71, 79, 92, 125, 128, 194, 196, 245
, 311, 318
wealth gap, 169, 172
Wealth of Nations (1776), Adam Smith, 28, 76, 111, 128, 143, 197, 289
Wealth , 3, 5, 8, 12, 14-16, 18, 20-22, 28-29, 32-34, 36-37, 43-45, 49-52,
55, 57, 71, 74, 76, 79-80, 89-92, 95, 98-99, 102, 106, 108-113, 115, 120,
123, 125, 127-129, 143, 146, 166-167, 169, 172, 177-178, 181, 185, 191,
194-197, 200, 202, 213, 216, 221-222, 226, 231-232, 238-239, 241-244,
245 , 249, 251-252, 254, 256-258, 260-261, 267-268, 271, 277-281, 285-
287, 289, 291, 293, 295-298, 300, 302-303, 307, 311-312, 314, 318, 320,
325, 330
wealthy elites, 155
weaponization, 133
weapons of mass destruction, 24, 95
weather, 46, 84, 91, 178-179
web of financial and property claims, 254
Webster, Daniel, 30
weights and measures, 35, 86, 159, 216, 225, 330
welfare programs, 226
welfare recipients, 105
welfare spending, 142, 212, 246
welfare-oriented norms, 305
well-being of employees and customers, 119
Wells, H. G. 87
Western Civilization, 55-56, 296
Western European socialist movements, 151
Western system, 341
Wharton School of Business, University of Pennsylvania, 31, 176
what and how future generations will think, 227
what economics is, or should be, 310
What is at stake? 304
what is fair, 119
what is not seen will not be taxed or regulated, 129, 257
what kinds of savings are being made, 282
what major campaign contributors want, 261
what to be smart about, 120, 175
what voters want, 213, 261
whatever banks will lend against, 101, 140
whatever the market will bear, 42, 328
whatever the market will bear, 42, 328
Wheeler, Burton, 40
when bankruptcies wipe out borrowers, 185
when bureaucracies seek their own self-interest, 155
when credit is extractive, 319
when labor is unemployed, 97
when major variables are changed, 247
Whig, 30, 210
whistle blower, 340
who controls the past controls the present, 215
who controls the state, 215
who will bear the losses, 175
who will overtake whom? ( kto:kogo ), 245
Who/Whom , 38, 245
Whorf, Benjamin Lee, 19
whose interests are served, 276
widening disparity, 172, 279
Widows and Orphans , 177, 190, 245
Wilde, Oscar, 87
William the conqueror, 167
willing partners, 180
Wilson Schaef, Anne, 25
Wilson, Charles, 28
Wilson, Woodrow, 22
wind, 210
Windfall , 33, 75, 184, 199, 201, 223, 237, 246 , 283
wipe out pension savings, 209
Wohlstetter, Albert, 23
Wolfowitz, Paul, 24
women, 22, 24, 58, 65, 179, 184
wood, 210
wool, 147
workhouses, 181
working bank balances, 69
working class majority, 90
working class, 57, 90, 138, 150, 152, 211
working conditions, 32, 58, 110, 112, 149-151, 177, 184, 230, 260
working hypotheses, 272
workplace protection, 14, 17, 152
workplace reforms, 196
workplace rights, 152
World Bank , 24, 32, 34, 59-60, 63, 121, 123-124, 161, 166, 199, 201, 227,
244, 246 , 275, 288, 328, 341
world economic powers, 275
World Economics Association, 11-12
World System , 75, 90, 237, 246
World Trade Organization (WTO), 24
World War I arms debts, 97
World War I, 19, 22, 31, 56, 59, 97, 109, 116, 135, 151, 184, 288, 333, 339,
345
World War II, 41, 56, 108, 124, 150, 165, 168, 173, 201, 225, 232, 258
world’s fastest real estate bubble (Latvia), 335
Worldcom fraud, 28
Worldcom, 28, 116
worldview, 151, 232, 276, 321, 324
Wray, L. Randall, 67, 80, 163, 188, 220
write-down, 98, 116, 225, 339
X&Y
X and Y Axes , 3, 52, 73, 176, 219, 247
Y
Yatsenyuk, Arseniy,277
Year of Our Lord, 89, 132
Yeltsin, Boris 110, 136, 147, 172
Yogi-ism, 271
your money or your life, 148
YouTube , 349
Yugoslavia, 339
Z
Zell, Sam, 342
zero profits, 351
zero-rent land, 197
Zero-Sum Activity , 3, 8, 20, 95, 103, 111, 175, 199-200, 229, 238, 243,
249, 254
zero-tax countries, 171
Zimbabwe, 116, 126