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Michael Hudson -- The Lehman's Limp
'...Well, banks don’t invest. That’s a myth. The pretense is that rescuing the banks rescued the economy. But the banks don’t make loans to the economy. Banks don’t make loans to fund factories. They don’t make loans for infrastructure. They make loans to buy assets already in place. They’re privatizing the structure to take it private, raise the rates the people have to pay for services. Essentially they lend to raiders taking over corporations. They won’t help a corporation put in more equipment and hire more people, but they’ll lend to a raider to break up a corporation, downsize the labor force, smash it up and leave it a bankrupt shell. That’s the financial management plan. That’s what they teach in business schools. -- Contrary to the idea that bailing out the banks helps the economy, the fact is that the economy today cannot recover without a bank failure. -- ... Debt grows exponentially. The interest charges grow year after year. If you have a savings account you can see it mount up, like if you have a retirement account you’ve seen the stocks go up. If you have it in bonds you see those go up. But the economy doesn’t go up anywhere near as much as the stock market. That means that the financial sector and the debt volume grows much faster than the economy can grow. So people – the economy, families – have to spend more and more of their money every month on their mortgage debt for housing, on their credit card debt, on their student loan debt, on their automobile debt, and also in health insurance. They have less and less money to spend on goods and services. -- So the starting point should be how are we going to bring the debt payments back in line so that the economy has room to grow? The only way to do this in any society is by writing down debt. Germany did that in 1948 with its economic miracle. They wrote down nearly all the domestic debt. Normally the function of a crisis like the Great Depression is to wipe out the bad debts. But when you wipe out the debts, you wipe out the savings, mainly of the One Percent. And the question is, who is the government going to make its policy for? The one percent of creditors, or the 99 Percent that the One Percent holds in debt? -- Well, obviously the One Percent is the donor class, and they’re writing the laws. The result of their leaving this debt in place is a rising debt-income ratio. That is, the proportion of corporate earnings that has to pay for debt service has been soaring because corporate raiders have gone to the banks, borrowed money and taken over corporations. Instead of using the corporate earnings to invest in more equipment, they’ve bought their own stock by stock buybacks that push up stock prices instead of investing. -- So the financial management philosophy that we have is diametrically opposed to what’s needed for economic growth. That should be what people are talking about, because more and more economists are warning that given the rising debt ratios, there’s going to be another crisis. What we should be talking about when we look back on the anniversary of Lehman’s bankruptcy is how to handle the next crisis in a way that doesn’t bail out banks, that bails out the economy by writing down the debts. -- If banks have bad debts, they’ve made bad loans. Banks used to be conservative and prudent. But if they make imprudent loans and they say, we don’t care the borrower can’t pay because we’ve sold the whole loan off to a pension fund or a German Landesbank, and somebody else is going to take the loss, you have to restructure the banking system and the financial management...'
economics  rentseeeking  financialization  deindustrialization  malspeculation  malinvestment  debt  ponzi  thegreatestdepression  MichaelHudson 
13 hours ago by adamcrowe
Mis-sold, expensive and overhyped: why our universities are a con | Aditya Chakrabortty | Opinion | The Guardian
For two decades, Westminster has used universities as its magic answer for social mobility. Ministers did so with the connivance of highly paid vice-chancellors, and in the process they have trashed much of what was good about British higher education. What should be sites for speculative inquiry and critical thinking have instead turned into businesses that speculate on property deals, criticise academics who aren’t publishing in the right journals – and fail spectacularly to engage with the serious social and economic problems that confront the UK right now. As for the graduates, they largely wind up taking the same place in the queue as their parents – only this time with an expensive certificate detailing their newfound expertise.
education  higherEducation  universities  expansion  fees  tuitionFees  pay  wages  salaries  marketisation  debt  class  socialMobility  UK  policy  dctagged  dc:creator=ChakraborttyAditya 
2 days ago by petej
How Does Technical Debt Affect a Business Financially? | Toptal
ations of Technical Debt
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BY ERIK FREDERICK - FINANCE EXPERT @ TOPTAL

#Budgeting #BusinessModel #CFOs
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Read the Spanish version of this article translated by Yesica Danderfer
tech  debt 
3 days ago by marcina
The Real Cost of the 2008 Financial Crisis | The New Yorker
According to the Basel report, asset managers now control nearly a hundred and sixty trillion dollars, more than the worldwide holdings of the banking industry. During a market sell-off, the report warned, some of these firms could face pressures—such as a surge of investors eager to cash out—that would lead to a downward spiral. A recent McKinsey study showed that in the past ten years the amount of outstanding corporate debt has tripled across the world. In the United States, the study noted, almost two-thirds of non-financial debt is rated as junk or one notch above junk. Roughly three trillion dollars of this questionable credit is set to mature in the next five years. If the economy falters, or if interest rates rise sharply, many corporations may find themselves in the position of new mortgage holders a decade ago—unable to repay or roll over their debts.
finance  politics  debt  crash  bubble 
3 days ago by soobrosa
Trump Adviser Kudlow Blames Deficits on Spending, Not Tax Cuts - WSJ
“The gap is principally spending too much,” Mr. Kudlow said. “We have to be tougher on spending. People are quick to blame deficits on tax cuts, but I don’t buy that,” he said. The official added he expects the government to run deficits of 4% to 5% of the nation’s GDP, and said “it’s not a catastrophe.”
taxes  deficit  debt 
3 days ago by brycecovert

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