Max Keiser interviews Steve Keen

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Debt deflation-On the Edge with Max Keiser-07-08-2011

In this edition of On the Edge, Max Keiser interviews Steve Keen, economist and author of the book Debunking Economics.

He says that debts have spiraled out of control and the reason is shadow banking system. The program touches on the correlation between the US-EU debt crisis and the worsening Greek economy.

Michael Hudson: “Debts that can’t be paid, won’t be paid.”

Related Post:

A Modern Jubilee: How to End the Recession.

Gordon Brown Did Not Spend All the Money. The Banks Did.

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Ann Pettifor chose this graph as the most significant one of 2011.

“This is the chart that struck me most forcibly, both for what it tells us about the debts of the private sector, in particular the private finance sector; but also because of what the Treasury chose not to tell us: that the public debt to GDP ratio is tiny compared to private sector debt to GDP ratio.” 

Ann Pettifor  http://www.debtonation.org/2011/12/my-graph-of-2011-along-with-top-economists/

In other words, the Brown government did not ‘max out the credit card’.  The increase in the debt to GDP ratio is the result of debt created by the financial sector, aka The City of London.

The UK’s staggering debt is now nearly 1000% of GDP as the Morgan and Stanley chart below indicates… but it is notable that neither the UK government debt or personal household debt to GDP are very different from the other countries compared on the chart.  It is solely the size of the financial sector debt which pushes up the total.

It was also financial sector debt which brought down Ireland and Iceland. Privatisation of profits and socialization of losses.  Unfortunately, under our present system, governments always end up having to rescue their financial sectors when they are about to fail from their risk-taking gambling … and that is the very good reason why our banks are unlikely to leave the UK in a mass exodus if they were properly controlled.  What country would want to take on the risk of bailing out the UK’s financial sector?

http://articles.businessinsider.com/2011-12-04/markets/30473957_1_household-debt-uk-safe-haven

The banker, Amschel Rothchilds’ famous quote was  Give me control of a nation’s money supply, and I care not who makes it’s laws.  This seems even more ominous, in light of the credit rating company, Moody’s threat to downgrade the UK’s AAA ratings.

The ratings agency Moody’s said on Tuesday night that the UK faced “formidable and rising challenges”, noting that the country’s prized triple-A rating depended on keeping the deficit reduction plan on track, adding: “Any additional weakening in the macroeconomic outlook or a need to support the banking system could temporarily set back the government’s fiscal consolidation … the outlook on the rating is likely to be sensitive to future developments in the euro area’s debt crisis.”

It should be understood that the ratings agents are not independently funded but are paid by the clients who have a vested interest in the credit ratings.  Losing the triple A rating means that the UK would have to pay more in interest to obtain a loan … in other words,  the tax payer will pay more to the financial sector in order to borrow the same amount of money… or to put it another way, the lenders like countries to be downgraded because they will make greater profits on lending to the UK that may then be squirreled away in some tax haven.

‘Sovereign debt’ in the Eurozone has become the new ‘sub-prime mortgages’, a bubble which is threatening to burst, and create economic havoc globally…

As Michael Hudson writes:

The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum….

…. It is claimed that without a profitable banking sector (no matter how predatory) the economy will break down as bank losses on bad loans and gambles pull down the payments system. No regulatory agencies can help, no better tax policy, nothing except to turn over control to lobbyists to save banks from losing the financial claims they have built up.

What banks want is for the economic surplus to be paid out as interest, not used for rising living standards, public social spending or even for new capital investment.

http://neweconomicperspectives.blogspot.com/2011/12/europes-transition-from-social.html

‘The success of this strategy in the US can be seen in a highly recommended series of graphs produced by the Wall Street Protesters.’ (1)  Richard Murphy says that it would also be valid for the UK.

http://www.taxresearch.org.uk/Blog/2011/10/13/whats-wrong-with-the-economy-in-two-graphs/

Michael Hudson explains:

From the financial sector’s vantage point, the “solution” to the Eurozone crisis is to reverse the aims of the Progressive Era a century ago – what John Maynard Keynes gently termed “euthanasia of the rentier” in 1936. The idea was to subordinate the banking system to serve the economy rather than the other way around. Instead, finance has become the new mode of warfare – less ostensibly bloody, but with the same objectives as the Viking invasions over a thousand years ago, and Europe’s subsequent colonial conquests: appropriation of land and natural resources, infrastructure and whatever other assets can provide a revenue stream. It was to capitalize and estimate such values, for instance, that William the Conqueror compiled the Domesday Book after 1066, a model of ECB and IMF-style calculations today.

I have deliberately intermixed references to the US and the EU with those referring to the UK, because this new financial crisis is not new; it is not a crisis produced by government spending on public services; and it is not a UK crisis.  This is a global banking crisis caused by the unregulated financial sector which was set free by Margaret Thatcher and Ronald Regan in the 1981. (2)

The Tory-LD ploy is to cynically trot out the lie, that over-spending on public services by the last Labour government caused ‘this mess’, and that they are ‘forced’ to clear it up by dismantling the welfare state, the NHS and our education system.  The reality is that this Tory-LD government is governing on behalf of the banks and ‘what banks want is for the economic surplus to be paid out as interest, not used for rising living standards, public social spending or even for new capital investment.’  The present financial position of the UK is the product of a global banking crisis coupled with George Osborne’s ‘suicidal policies’ (3).  It is not because ‘Gordon Brown spent all the money’!

(1)  https://think-left.org/2011/10/14/capitalism-neoliberalism-plutonomy-and-neo-feudalism/

(2) Red Labour must address the elephant in the room.  https://think-left.org/2011/07/21/red-labour-must-address-the-elephant-in-the-room/

(3) http://www.taxresearch.org.uk/Blog/2011/12/16/yours-struggling-but-uk-companies-cash-has-gone-up-by-40-since-2008/

Related Posts

https://think-left.org/2011/11/07/the-market-has-a-name-it-is-goldman-sachs/

https://think-left.org/2011/08/26/the-empire-of-things/