In the Great Depression, high finance and other investors lost fortunes (paper fortunes, to be sure) as stock market and real estate prices plunged and debtors defaulted. But there was a silver lining. The liquidations of wealth wiped out debts. This freed the economy from interest and principal obligations, enabling recovery to take place. But unlike the case in the 1930s, today’s 1% are unwilling to absorb a loss. They have used government agencies originally created to regulate high finance to enforce harsh creditor terms and make the economy’s nonfinancial sectors absorb the losses, partly by foreclosure and partly by taking bad debts onto the government’s balance sheet (“taxpayers”). As a bonus, banks (most notoriously Bank of America) and A.I.G. received long-term tax credits that render them largely tax-free institutions.
Tuesday, April 10, 2012
A Must Read
Michael Hudson gives us a terrific history lesson and view into our future in this analysis. I urge you to read this and think beyond relative returns and spreads, beyond probability theory, and consider the writing on the wall.
Here's a notable excerpt: