...and forgive them their DEBTS

[raspberry-blower]

A new book out by Michael Hudson on 13th November:

https://michael-hudson.com/2018/08/and- ... eir-debts/

[raspberry-blower]

A review of this book recently posted st Naked Capitalism:

Everything you thought you knew about "Western Civilisation" is wrong: A review of And Forgive Them Their Debts

To say that Michael Hudson’s new book And Forgive Them Their Debts: Lending, Foreclosure, and Redemption from Bronze Age Finance to the Jubilee Year (ISLET 2018) is profound is an understatement on the order of saying that the Mariana Trench is deep. To grasp his central argument is so alien to our modern way of thinking about civilization and barbarism that Hudson quite matter-of-factly agreed with me that the book is, to the extent that it will be understood, “earth-shattering� in both intent and effect. Over the past three decades, Hudson gleaned (under the auspices of Harvard’s Peabody Museum) and then synthesized the scholarship of American and British and French and German and Soviet assyriologists (spelled with a lower-case a to denote collectively all who study the various civilizations of ancient Mesopotamia, which include Sumer, the Akkadian Empire, Ebla, Babylonia, et al., as well as Assyria with a capital A). Hudson demonstrates that we, twenty-first century globalists, have been morally blinded by a dark legacy of some twenty-eight centuries of decontextualized history. This has left us, for all practical purposes, utterly ignorant of the corrective civilizational model that is needed to save ourselves from tottering into bleak neo-feudal barbarism

[BritDownUnder]

I can see a creditor / debtor society emerging in Australia. With current low interest rates people have borrowed heavily and now a typical mortgage is some six times salary and I have heard ten times in Sydney. If interest rates rose to normal levels there would certainly be a housing crisis.

One manager at my office who is normally based in Sydney had to beg borrow etc money to get a 10% deposit on a $2.5 million property in a nice part of Sydney.

Thankfully I am reducing my debt at present and should be debt free in about two years at current rate.

[Little John]

same here

[vtsnowedin]

The latest US household debt accounting.

NEW YORK (Reuters) - Americans’ borrowing reached $13.29 trillion in the second quarter, up $454 billion from a year ago, marking a 16th consecutive quarter of increases, a New York Federal Reserve report released on Tuesday showed. The level of U.S. consumer debt was $618 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008. It was 19.2 percent above a post global credit crisis low set in the second quarter of 2013, the New York Fed said. The ongoing growth in home, auto, student and credit loans has been linked with a solid labor market.

The rise in indebtedness did not make it more difficult for borrowers to meet their monthly payments last quarter. The rate on seriously delinquent loans, or those that are 90 days or more past due, was 2.3 percent in the second quarter, unchanged from the prior quarter. Notably, the pace of student loans turning seriously delinquent slowed to 8.6 percent from 8.9 percent, the N.Y. Fed survey showed.

“While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student loan over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans,� Wilbert van der Klaauw, senior vice president at the New York Fed, said in a statement.

The amount of student loans grew to $1.41 trillion in the second quarter, up $61 billion from a year before.
Total auto debt increased to $1.24 trillion, $48 billion above a year-ago.

Credit card loans climbed $45 billion from a year earlier to $829 billion.

Total mortgage debt rose to $9.00 trillion, up $308 billion from a year ago.

While the increase in debt is a negative I think the authors are overstating the case by not comparing the equity people have in their mortgaged homes and autos with outstanding loans. It may well be that total net worth is rising . After all people are showing considerable confidence in their ability to pay off their debts and are happily buying non essential items and larger houses then are required by their family size.

[kenneal - lagger]

...
While the increase in debt is a negative I think the authors are overstating the case by not comparing the equity people have in their mortgaged homes and autos with outstanding loans. It may well be that total net worth is rising . After all people are showing considerable confidence in their ability to pay off their debts and are happily buying non essential items and larger houses then are required by their family size.

The poor sods obviously have no idea of the concept of nett energy and how it will negatively effect the world's and the US' economies. Neither do they have any concept of how climate change will negatively affect economies.

Equity in a new car? In the UK a new car loses a third of its value when it's driven off the garage forecourt. And the equity in a house is only as good as confidence in the housing market. And that is very fickle indeed!

We went mortgage/debt free several years ago, thank goodness.

[raspberry-blower]

Dr Michael Hudson on Renegade Inc

[vtsnowedin]

Equity in a new car? In the UK a new car loses a third of its value when it's driven off the garage forecourt.

I suspect you are exaggerating here quite a bit. But whatever the actual figure is, few , in fact very few, would ever want to trade in a car after one day and if the buyer has need and use for a new car it is worth the purchase price to him, and at any time in it's life cycle the car has equity equal to the cost of a similar unit in both age and mileage, minus whatever is still owed on the original loan if any.

And the equity in a house is only as good as confidence in the housing market. And that is very fickle indeed!

When was the last time the cost of houses in the UK dropped by half?
...........
So it is not all that fickle , Is It?

We went mortgage/debt free several years ago, thank goodness.

Always a wise policy if possible and I am quite happy now that I have achieved the same but it was not possible when we were raising and educating three children on middle class incomes.
I'll take a mortgage on a serviceable house without batting an eye but subsist on a diet of canned soup before racking up any credit card debt.[/quote]

[kenneal - lagger]

Many people in the UK only need a 10 to 15% drop in their house price to put them into negative equity and give the banking sector and government the jitters. A fifty percent drop would cause an out and out banking crisis.

There have been two significant house price falls according to this graph and numerous smaller drops in price over the last seventy years.

Going off at a slight tangent, I wonder how this graph correlates to a graph of immigrant numbers per annum?

[emordnilap]

Michael Hudson (and Rumpelstiltskin!) are cited in this thoughtful piece.

Hudson also points out that no government or monarch that permitted this [i.e. allowing private creditors or oligarchs to have an absolute right to repayment] kind of repayment at all costs and subsequent appropriation of public assets by private creditors has ever survived economically.

This is pretty obvious, the equivalent of putting debtors in prison, unable to repay their debts…but the lessons of the past are lost on or ignored by those with the most to gain in the present.

Another family is made homeless every single day in Ireland by the very people whose debts are being serviced by those families.

[PS_RalphW]

I lost a third of the 'value' of my house in the 1988 decline. I was single, well paid, and put every penny I had into staying ahead of negative equity for 4 years. That enabled me to step up the housing ladder when I moved as I kept putting the same money into the bank every month, and my mortgage evaporated with the declining interest rates.

I was very lucky to be in a position to do that.

House prices are entirely artificial. We have a nearly finite supply, thanks to the government being in the pockets of the major house building corporations, and we have more people and smaller average occupancy per house. Beyond the cost of building the physical house, land prices are whatever people can afford to pay to live in that space.

What we are paying is rent - either directly to the house owner, or to the mortgage owner, with a promise that we will own the house in 10, 20 or 30 years. The rent we pay is the largest proportion of our gross income that leaves us with just enough to survive on what is left. As we get proportionately poorer, the mortgage owner finds new ways to keep the money coming in and the headline 'price' of the house rising - either the mortgage interest rates are cut to make the rent more affordable, or the duration of the mortgage is increased, to 40 years, or even multi-generational until the debt is paid.

This keeps the existing home owners very happy as they think they are getting richer (and in practice their children will inherit that wealth) even though they can only access it by down-sizing.

It makes multiple property owners very wealthy. Families that had fewer than 2 kids end up increasing the wealth of their children into the property ownership class through inheritance.

Of course this cannot continue indefinitely. Immigration of economically active people (or the purchase of top properties by foreign money launderers) help top it up a bit, but only at the expense of driving the poorest closer to homelessness.


This is the essence of Thatcherism. It can only have one ultimate outcome, with massive debt default, and house price deflation. In the process many people with mortgages will suddenly find that they are homeless yet still in debt, whilst the wealthy pick up the houses at fire sale prices, further increasing wealth inequality.

I need to stick my hand up here - I haven't paid 'rent' in decades. I saw the way the market was going and , combined with inheritance, end up with unearned wealth and income.

Wealth redistribution needs to come soon.

I pay my debt to society through my social commitments and try to tread lightly on this earth.

[BritDownUnder]

Many people in the UK only need a 10 to 15% drop in their house price to put them into negative equity and give the banking sector and government the jitters. A fifty percent drop would cause an out and out banking crisis.

There have been two significant house price falls according to this graph and numerous smaller drops in price over the last seventy years.

Going off at a slight tangent, I wonder how this graph correlates to a graph of immigrant numbers per annum?

I hate to dig up an old conversation but I think this graph would be better with the Y axis as a logarithmic plot or at least in terms of multiples of average salary. It would give a better idea of whether the (geometrical?) rate of house price growth is fairly even over the years or if the the house price growth has accelerated over the years.

In parts of Australia there are indications that the rate of grow is, or at least was, until 2018 accelerating and in terms of average salary the rate of growth is increasing. There are various reasons given for this but the main reasons are the concentration of building land into hands of developers, difficulty in permitting to get a house built partly due to corruption in local councils and the fact that wages for 'ordinary' people are just not rising.