There’s some lovely filth down here…
For example: I got sold to another “lord of the manor”, ie I got a notice that my mortgage was bought by another company (the interest of which eats up a THIRD of my labor).
If you add up taxes and interest, I live on less than 25% of my income. How is that not serfdom? I just live on an extremely large plantation (aka the USA).
Well, it’s food for thought. I am still working my way through all of this.
But homeowners are not the only ones who will pay. The overall economy likely will shrink as well. That $200 billion that flowed into the “real” economy in 2004 is already spent, with no future capital gains in the works to fuel more such easy money. Rising debt-service payments will further divert income from new consumer spending. Taken together, these factors will further shrink the “real”economy, drive down those already declining real wages, and push our debt-ridden economy into Japan-style stagnation or worse. Then only the debt itself will remain, a bitter monument to our love of easy freedom.
- Dr. Michael Hudson
In reality, alas, we can’t all be rentiers. Just as, in Voltaire’s phrase, the rich require an abundant supply of the poor, so too does the rentier class require an abundant supply of debtors. There is no other way. In fact, the vast majority of Americans have seen their share of the rental pie decrease over the last two decades, even as the real estate pie as a whole has expanded. Everyone got a little richer, but rich people got much, much richer.
We will be hard-pressed to maintain even this semi-blissful state. Like any living organism, real economies don’t grow exponentially, or even in a straight line. They taper off into an S-curve, the victim of their own successes. When business is good, the demand for labor, raw materials, and credit increases, which leads to large jumps in wages, prices, and interest rates, which in turn act to depress the economy. That is where the miracle of compound interest founders. Although many people did save money at interest two thousand years ago, nobody has yet obtained even a single Earth-volume of gold. The reason is that when a business cycle turns down, debtors cannot pay, and so their debts are wiped out in a wave of bankruptcy along with all the savings invested in these bad loans.
Japan learned this lesson in the Nineties. As the price of land went up, banks lent more money than people could afford to pay interest on. Eventually, no one could afford to buy any more land, demand fell off, and prices dropped accordingly. But the debt remained in place. People owed billions of yen on homes worth half that—homes they could not sell.
Read the rest here.
As usual, this is just food for thought. I’m not promoting anything.