J Is for Junk Economics · A Guide to Reality in an Age of Deception by Hudson, Michael -- Read -- Imperial Library of Trantor

Index

Cover Title Page Copyright List of Illustrations

Figure 1: Financial Crisis vs. Business Cycle (graph) Figure 2: Geometric Growth (graph) Figure 3: “The Miracle of Compound Interest” – How Debt Doubles (illustration) Figure 4: How the Rise in Debt Overhead Slows Down the Business Cycle and Causes Debt Deflation Figure 5: Finance Capitalism in its Long-Term Context Figure 6: Distribution of Average Income Growth During Expansions (graph) Figure 7: THE “REAL” ECONOMY (domestic private sector) (diagram) Figure 8: Rosetta Stone (photo) Figure 9: Rule of 72 (diagram) Figure 10: S-Curve (graph) Figure 11: Federal Student Loans (graph) Figure 12: The Two Economies (chart) Figure 13: X & Y Axis (graph) Figure 14: Hudson Bubble Model: Two Types of Inflation Contrasted (chart) Figure 15: Wage-Earner DPI* (chart) Figure 16: Business Cash Flow (ebitda) to Pay the FIRE Sector (chart) Figure 17: Michael Hudson (photo)

Foreword Preface Acknowledgments A-to-Z Vocabulary Guide Essays and Articles

The 22 Most Pervasive Economic Myths of Our Time

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

MYTH #1: The National Income and Product Accounts (NIPA) show how fortunes are built up. MYTH #2: All income is earned, reflecting the recipient’s contribution to production. MYTH #3: There is no such thing as unearned income. MYTH #4: Economic rent is earned, and is simply another form of industrial profit. MYTH #5: The public sector is deadweight, and government activity is unnecessary overhead. The inference is that public spending should be minimized. 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.” MYTH #7: Capital gains are not income, and hence should not be subject to income tax or contributions to fund Social Security.

GROUP #2: Myths of Finance Capitalism that rationalize its predatory hold on the economy

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 #11: Social Security should be pre-funded by its beneficiaries. Progressive income taxes should be abolished in favor of a flat tax – just one tax rate for everyone. MYTH #12: Voters get what they vote for. It is their fault if public policy does not serve their needs.

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. 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. MYTH #16: Higher real estate taxes make housing more costly, while cutting these taxes helps make housing more affordable.

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! 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. MYTH #20: Deregulating the financial sector will free it from paperwork and enable it to pass the cost savings on to its customers. MYTH #21: Markets return to balance if instability disrupts activity. Business cycles are cured by the economy’s automatic stabilizers, so there is no need for government regulation or intervention from “outside” the market.

Recovering from Misleading Economic Mythology

Economics as Fraud

Economics versus the Natural Sciences: The Methodology of “As If” Looking at the mathematics, not the real world Fictitious economic theories and vocabulary invariably serve special interests Mainstream economics as mathematized tunnel vision The semantics of marginalist equilibrium theory The distortions of today’s major statistical categories How junk economics treats savings and debt Problems, dilemmas and quandaries Mainstream economics in today’s Age of Deception and Fraud Reality economics: Debts that can’t be paid, won’t be Mathematizing the economy’s financial dimension The requisite starting point for the study of economics

Economic Methodology is Ideology, and Implies Policy

Political scope of economic theorizing about markets The role of government: Productive or intrusive? Polarization vs. equilibrium theory and its “automatic stabilizers” Debt is an overhead cost polarizing economies vs. “Debt doesn’t matter” The importance of how income and wealth are distributed The scope of economic analysis: Social vs. individualistic Reality Economics vs. a parallel universe “science of assumptions” Trapping would-be reformers into an anti-reform methodology It is not necessary to re-invent the analytic wheel What is at stake?

Does Economics Deserve a Nobel Prize?

A Revolution

Hudson Bubble Model: From Asset-Price Inflation to Debt-Strapped Austerity

The symbiotic Finance, Insurance and Real Estate (FIRE) Sector How financialization and the tax shift off the One Percent strip the 99 Percent of its disposable personal income How financialization deflates the “real” economy Leaving corporations with less post-financialized income to invest The FIRE Sector’s extraction of rentier revenue Financialization differs from the industrial exploitation of labor

Interview: Killing the Host

Democratic vs. oligarchic government and their respective economic doctrines The concept and theory of economic rent (unearned income) The Austrian School vs. government regulation and pro-labor policies Finance as the new mode of warfare The case of Latvia: Is it a success story, or a neoliberal disaster? The Troika and IMF doctrine of austerity and privatization Financialization of pension plans and retirement savings Obama’s demagogic role as Wall Street shill for the Rubinomics gang An alternative for the 99 Percent

About the Author Paul Craig Roberts’ Hudson Bio Books and Publications by Michael hudson A-TO-Z Vocabulary Guide Index

A B C D E F G H I J K L M N O P Q R S T U V W X&Y Z

Notes

Preface Introduction A-to-Z VOCABULARY GUIDE

A B C D E F G H I J L M N O P Q R S T V

22 Myths Economics as Fraud Methodology is Ideology CounterPunch Interview

Topic Index

A is for Adam Smith, Asset-Price Inflation and Austerity B is for Bubble, and the Bailout that follows C is for Casino Capitalism and the Client Academics who praise it D is for Debt Deflation and the Debt Peonage it leads to E is for Economic Rent and “Euthanasia of the F is for Fictitious Capital and the FIRE Sector where it is concentrated G is for Grabitization and the Groundrent that is its main objective H is for Hubris I is for Inner Contradiction and the Invisible Hand J is for Junk Bonds and Junk Economics K is for Kleptocrat L is for Learned Ignorance M is for Marginalism and the Money Manager Capitalism N is for Neofeudalism and its Neoliberal advocates O is for Oligarchy P is for Ponzi Scheme and the Pension-Fund Capitalism that feeds it Q is for Quandary R is for S is for Say’s Law and Serfdom T is for Trickle-Down Economics U is for Unearned Income V is for the Vested Interests W is for Wealth Addiction X & Y are for the X and Y Axes Z is for Zero-Sum Activity

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